/ 


-t^& 


* 


NEW  MONETARY  SYSTEM: 


THE    ONLY    MEANS    OF 


SECURING    THE    RESPECTIVE   RIGHTS 
OF    LABOR   AND    PROPERTY, 


PROTECTING  THE  PUBLIC  FROM  FINANCIAL  REVULSIONS. 

BY 

EDWARD    KELLOGG. 


REVISED   FROM   HIS   WORK   ON   "LABOR    AND   OTHER   CAPITAL," 
WITH    NUMEROUS   ADDITIONS. 


EDITED  BY 

MARY    KELLOGG    PUTNAM. 


NEW  YORK: 

RUDD    &   CARLETOX,  130   GRAXD   STREET. 
LONDON:— SAMPSON  LOW,  SON  A   CO. 

MDCCCLXl. 


ENTEUED  according  to  Act  of  Congress,  in  the  year  1861,  by 
MAKY   KELLOGG   PUTNAM, 

i  the  Clerk's  Office  ot  the  District  Court  of  the  United  States,  for  the  Southern 
District  of  New  York. 


W.  H.  TI.VSOH,  Stercotyper,  R.  CRAICHIKAD,  Printer 


TABLE  OF  CONTENTS. 


PAGE 

PREFACE  BY  THE  EDITOR, xi 

PREFACE  BY  THE  AUTHOR, xv 

INTRODUCTION, . .  It 


PART    I. 

TELE    IPRnSTCIPiLES    OF    DISTRIBUTION. 

CHAPTER  I. 
Of  Value, 41 

CHAPTER   II. 

MONEY,    THE   MEDIUM    OF    DISTRIBUTION. 
SECTION  I. 

The  Nature  and  Properties  of  Money, 45 

SECTION  II. 
The  Power  of  Money  to  Represent  Value, 46 

SECTION  III. 
The  Power  of  Money  to  Measure  Value, 56 

2003117 


IV  CONTEXTS.  %     '; 

tarn 

SECTION  IV. 

The  Power  of  Money  to  Accumulate  Value  by  Interest,       60 

SECTION  V. 
The  Power  of  Money  to  Exchange  Value, 68 

SECTION  VI. 

The  Material  of  Money,  and  the  Distinctions  between 
Money  and  the  Material  of  which  it  is  made, 71 

CHAPTER  III. 

THE   RATES    OF   INTEREST   THE    GOVERNING    POWER   OF   DISTRI- 
BUTION  TO    LABOR   AND    CAPITAL. 

SECTION  I. 

The  Power  of  Capital  to  accumulate  Property  and 
Labor,  according  to  the  Rate  of  Interest, 19 

SECTION  H. 

The  Wealth  of  Cities,  and  the  Means  of  its  Accumu- 
lation,    97 

SECTION  in. 

Interest  received  by  the  Citizens  of  New  York  on 
Loans  to  the  Country, 107 

SECTION  IV. 

The  per  centage  Actual  Increase  of  the  Value  of  the 
Property  of  the  States  of  New  York  and  Massa- 
chusetts, compared  with  the  per  centage  Legal  In- 
crease on  the  Property  of  these  States  for  the  same 
periods, m 


CONTENTS.  V 

PAOK 

SECTION  V. 
Interest  on  National  and  State  Debts, 121 

SECTION  VI. 

No  Accumulation  of  Property  by  Labor  equal  to  the 
Accumulation  by  the  Loan  of  Money  at  seven  per 
cent.  Interest, 126 

SECTION  vn. 
Two  Per  Cent,  per  annum  too  high  a  Rate  of  Interest,   *135 

SECTION  vm. 

The  Reduction  of  Interest  would  be  an  equal  benefit  to 
the  Producing  Classes,  whether  Property  should  Rise 
or  Fall  in  Price,  in  consequence  of  such  reduction,.  139 

SECTION  rx. 

Effects  upon  Producers  of  High  and  Fluctuating  Rates 
of  Interest,  142 

SECTION  X. 

The  Oppression  of  Labor  by  a  Monopoly  of  Land  not 
so  great  as  the  Oppression  by  High  Rates  of  Interest 
on  money,   j>. . .     14T 

SECTION  XI. 

The  Rate  of  Interest  determines  the  Price  of  Property, 
and  a  Rise  of  Interest  increases  the  Power  of  Money 
to  command  property, 153 

SECTION  xn. 

The  Rise  of  the  Rate  of  Interest  increases  the  Liabi- 
lities of  all  Debtors, 154 


VI  CONTENTS. 

PAGE 

SECTION  XIII. 

Rents,  whether  High  or  Low,  bear  the  same  Relative 
Value  to  their  Principal;  but  when  the  Per  Centage 
Interest  on  money  is  Increased,  not  only  is  its  Rela- 
tive Proportion  to  the  principal  Increased,  but  each 
Fractional  Part  has  Increased  Value,  ...........  158 

SECTION  XTV. 

To  dheapen  Prices  by  an  Unjust  Rate  of  Interest  and 
a  Scarcity  of  Money,  is  but  to  Cheapen  the  Labor 
of  all  producers,  and  Give  their  Earnings  to  Capital- 
ists without  an  equitable  equivalent,  ............  161 

SECTION  XV. 

Voluntary  Agreement  no  Test  of  a  just  Rate  of  In- 
terest, ....................................  164 

SECTION  XVI. 

The  Law  of  Interest  on  Money  an  Accumulative  not 
a  Producing  power,  ..........................  169 

SECTION  XVII. 
Estimate  of  a  just  Rate  of  Interest,  ............         175 


SECTION  xvm. 

Beneficial  Results  to  Laborers  and  Merchants  from  the 
Reduction  of  the  Rate  of  Interest,  ............       178 

SECTION  xry. 

The  Low  Prices  of  Labor  in  European  countries  not 
caused  by  their  Low  Rates  of  Interest,  ____  185 


CONTENTS.  Vll 

CHAPTER  IT. 

THE     BANKING     SYSTEM. 
SECTION  I. 

PAGB 

The  Nature  of  Banks,  their  Institution,  and  the  Prin- 
ciples by  which  they  are  governed, 193 

SECTION  n. 

The  Amount  of  Specie  owned  by  the  Banks,  and  the 
Interest  paid  by  the  people  on  Bank  Loans, 203 

SECTION  m. 
Basis  of  the  Bank  of  England, 215 

SECTION  IV. 
The  Balancing  Power  of  Bank  Notes  and  Deposits,..     21t 

SECTION  V. 

The  Management  of  the  Banks,  and  the  Effects  of 
their  operation  upon  the  Prosperity  of  Trade  and 
Productive  Industry, 219 

SECTION  YL 
Remarks  on  the  Repeal  of  the  Usury  Laws, 249 

CHAPTER  V. 

The  Amount  of  a  Currency  should  be  Limited  only  by 
the  Wants  of  Business, 254 

CHAPTER  VI. 

The  Necessity  of  Credit, 261 


CONTENTS. 


CHAPTER  VII. 


A  well  regulated  Currency  Impossible  under  Present 
Laws,  .  ,  .............     263 


Recapitulation, , 


PART    II. 

^    TRUE    MONETARY    SYSTEM. 

CHAPTER  I. 
The  Security  of  a  Paper  Currency, 269 

CHAPTER  II.  * 

THE     SAFETY    FUND. 

SECTION  I. 
The  Foriuatiou'of  the  Money,  and  the  Mode  of  Issue,     273 

SECTION  n. 
The  Security  of  the  Safety  Fund  money, 278 

SECTION  ra. 
The  Rate  of  Interest  on  the  Safety  Fund  money, 282 

SECTION  rv. 
Organization  and  Management  of  the  Safety  Fund, . .     286 

SECTION  V. 
The  probable  Amount  of  Safety  Fund  money, 288 


CONTENTS.  IX 

PAGB 

CHAPTER  III. 

The  Advantages  of  the   Safety   Fund    money  over 
Specie 290 

CHAPTER  IV. 

OBJECTIONS   TO   THE    SAFETY   FUND    CONSIDERED. 

SECTION  I. 

Objections  to  a  Paper  Currency  on  account  of  Foreign 
Trade  considered, 295 

SECTION  II. 

Sundry  Objections — the  Effects  of  the  Safety  Fund  on 
our  Banking  Institutions,  etc.,  considered 300 

CHAPTER  Y. 
Advantages  of  the  Safety  Fund, 307 

CONCLUSION, 318 

APPENDIX, 325 


PREFACE  BY  THE  EDITOR. 


THE  first  edition  of  the  following  treatise  on  the  nature  of 
money  and  its  relations,  as  governing  power,  to  the  distribu- 
tion of  wealth,  appeared  in  1849.*  After  its  publication, 
the  author  continued  to  write  on  the  same  subject,  with  the 
intention  of  giving  his  views  to  the  public  in  a  different  form; 
but  he  finally  relinquished  this  design,  and  resolved  to  include 
the  new  matter  in  the  original  work.  The  illness  preceding 
his  death  compelled  him  to  forego  the  labor  necessary  for  this 
end,  but  during  the  winter  of  1857-8,  he  made  some  erasures 
and  amendments,  dictated  a  few  paragraphs  to  be  inserted, 
and  changed  the  name  of  the  book  to  its  present  more  char- 
acteristic title.  He  also  authorized  the  daughter  who  had 
long  been  his  amanuensis,  to  make  such  additions  from  his 
manuscripts  as  her  knowledge  of  his  wishes  and  her  judgment 
should  direct. 

In  fulfilling  this  trust,  the  editor  has  selected  numerous 
passages  from  his  writings,  and  has  either  incorporated  them 

*  Under  the  title  of  "  Labor  and  other  Capital ;  the  Rights  of  each 
Secured,  and  the  Wrongs  of  both  Eradicated ;  or  an  Exposition  of 
the  Cause  why  Few  are  Wealthy  and  Many  Poor ;  and  the  Delineation 
of  a  System,  which,  without  infringing  the  Rights  of  Property,  will 
give  to  Labor  its  just  Reward  "  Published  by  the  author. 

xi 


Xii  PREFACE  BY   THE   EDITOR. 

with  the  body  of  the  work  or  appended  them  in  notes.  Oc- 
casionally she  has  brought  within  a  smaller  compass  several 
paragraphs  of  similar  import,  and  she  has  made  some  verbal 
corrections  and  transpositions,  taking  care  in  all  to  preserve 
the  author's  style  and  thought  uninjured.  The  manuscripts 
from  which  the  first  edition  was  prepared,  have  also  been 
examined  by  her,  and,  in  a  few  instances  portions  that  had 
been  abridged  have  been  restored  to  their  original  form. 
The  most  important  new  point  is  the  criterion  of  a  just  rate 
of  interest,  derived  from  the  expense  of  instituting  and  cir- 
culating the  money  ;  and  all  the  matter  relating  to  this  topic 
has  been  given.  Her  aim  in  choosing  the  extracts  and  com- 
piling the  Appendix,  has  been  to  render  the  work  as  nearly 
as  possible  the  complete  exponent  of  the  author's  views  on 
this  subject ;  and  she  believes  these  additions,  embracing  some 
results  of  his  latest  thought,  will  be  found  sensibly  to  in- 
crease the  value  and  interest  of  the  book. 

This  work  claims  to  show  the  cause  and  the  cure  of  finan- 
cial revulsions,  and  of  the  poverty  of  the  producing  classes  ; 
for  the  author  traces  both  these  evils  to  one  source.  It  may 
be  doubted  by  many  whether  any  means  exist,  and  whether 
any  discovery  can  be  made,  capable  of  effecting  a  radical 
change  hi  these  matters  ;  for  we  have  almost  come  to  look 
upon  the  depression  of  the  laboring  classes  as  a  remediless 
evil,  and  upon  monetary  revulsions  as  things  inherent  in  the 
order  of  the  world.  The  assertion  that  they  may  be  done 
away,  justly,  peaceably,  and  permanently,  certainly  requires 
to  be  sustained  by  conclusive  proof.  It  seems  not  too  much 
to  say  that  the  author  has  furnished  this  proof — that  he  has 
unfolded  the  nature  of  money  and  set  its  operations  in  a  new 
light,  showing  thereby  the  true  laws  of  distribution  ;  and 


PEEFACE   BY   THE   EDITOE.  X1U 

that  he  has  also  devised  a  new  mode  of  instituting  a  national 
currency  adapted  to  the  needs  of  the  people.  According  to 
his  plan,  all  the  money  in  circulation  would  be  a  legal  tender, 
perfectly  secured.  In  the  very  inception  of  this  money  the 
rate  of  interest  would  be  fixed,  without  the  possibility  of  va- 
riation, at  any  point  which  should  be  found  most  conducive 
to  the  public  well-being,  thus  dispensing  with  the  necessity 
for  usury  laws.  The  money  would  be  at  par  in  all  parts  of 
the  country,  and  could  be  obtained  by  all  on  offer  of  the 
required  security,  so  that  one  State  or  section  would  have  no 
advantage  over  any  other  in  respect  to  money.  The  volume 
of  the  currency  would  always  adjust  itself  to  the  wants 
of  trade,  and  there  could  never  be  either  a  surplus  or  a  scarc- 
ity; consequently  financial  revulsions  could  never  occur.  It 
appears  in  the  course  of  the  work  that  the  interest  on  money  is 
the  "  governing  power  of  distribution  to  labor  and  capital ;" 
and  that  by  fixing  and  maintaining  the  right  rate  of  interest, 
the  producing  classes  would  receive  the  just  reward  of  their 
labor. 

"Whether  this  momentous  question  of  founding  a  national 
currency,  upon  a  true  basis,  shall  now  be  considered  ;  or 
whether  it  shall  be  postponed,  until  we  have  suffered  still 
further  from  financial  revulsions,  and  the  increasing,  unjust 
poverty  of  our  laborers,  is  for  the  people  themselves  to  decide. 
But  be  the  period  near  or  remote,  it  is  certain  to  arrive  ;  and 
then  the  thorough  sifting  and  testing  of  the  principles  and 
the  plan  which  the  author  has  set  forth,  will  show  how  great 
is  the  service  he  has  rendered  to  man. 


BROOKLYN,  February,  1S61. 


PREFACE  BY  THE  AUTHOR. 


THE  laboring  classes  of  all  civilized  nations  have 
been,  and  are,  as  a  body,  poor.  Nearly  all  \vealth  is 
the  production  of  labor ;  therefore,  laborers  would 
have  possessed  it,  had  not  something  intervened  to 
prevent  this  natural  result.  Even  in  our  own  country, 
where  the  reward  of  labor  is  greater  than  in  most 
others,  some  cause  is  operating  with  continual  and 
growing  effect  to  separate  production  from  the  pro- 
ducer. The  wrong  is  evident,  but  neither  statesmen 
nor  philanthropists  have  traced  it  to  its  true  source ; 
and  hence  they  have  not  been  able  to  project  any 
plan  sufficient  for  its  removal. 

The  design  of  the  present  volume  is  to  show  the 
true  cause ;  and  to  illustrate  its  operation  so  plainly 
and  variously,  that  any  ordinary  mind  may  easily 
perceive  how  it  has  produced  and  continued  this  un- 
natural oppression  of  laborers.  It  will  also  be  shown, 
with  equal  clearness,  that  a  simple  and  effectual  rem- 
edy can  be  applied  to  the  removal  of  the  evil.  A 
good  government  must  have  some  system  by  which 
it  can  secure  the  distribution  of  property  according 
to  the  earnings  of  labor,  and  at  the  same  time  strictly 


XVI  PEEFA.OE  BY  THE  AUTHOE. 

preserve  the  rights  of  property :  and  no  government, 
whether  republican  or  not,  that  fails  in  these  particu- 
lars, can  insure  the  freedom  and  happiness  of  the 
people  and  become  permanent.  The  plan  proposed 
to  secure  this  distribution  is  obviously  safe  and  cer- 
tain ;  and  it  contemplates  no  agrarian  or  other  similar 
distribution  of  property,  nor  any  interference  in  con- 
tracts between  laborers  and  capitalists,  or  in  the  usual 
course  of  business.  Fulfilling  these  requirements,  it 
can  hardly  fail  to  recommend  itself  to  all  thinking 
men.  Therefore,  it  is  confidently  believed  that  when 
the  plan  shall  become  generally  known,  it  will  be 
quickly  put  into  operation,  and  thus  save  the  produc- 
ers of  this  nation  from  the  oppression,  degradation 
and  misery  which  have  befallen  the  laboring  classes 
of  all  other  countries. 


A  NEW  MONETARY  SYSTEM. 


INTRODUCTION. 

All  civilized  nations  enact  certain  fundamental  laws. 
These  are  governing  powers,  and  subsequent  laws  are 
intended  to  carry  them  out  into  practical  use.  The  most 
important  fundamental  law  in  any  nation  is  that  which 
institutes  money ;  for  money  governs  the  distribution  of 
property,  and  thus  affects  in  a  thousand  ways  the  rela- 
tions of  man  to  man.  If  wrongly  instituted,  it  cannot 
be  rightly  governed  by  any  subsequent  laws ;  and  the 
wrong  distribution  of  property  consequent  upon  it  must 
corrupt  society  in  all  its  branches.  The  evils  engendered 
can  never  be  remedied  except  by  altering  the  funda- 
mental law.  Changes  in  the  subsequent  laws,  so  long  as 
they  are  founded  on  a  wrong  base,  can  only  result  hi  the 
exchange  of  one  evil  for  another.  The  proposition  that 
wrong  premises  will  produce  Avrong  conclusions  is  often 
stated,  yet  it  is  seldom  fully  understood  and  properly 
appreciated.  "We  will  therefore,  by  means  of  one  or 
two  simple  illustrations,  show  the  governing  power  of  a 
fundamental  principle. — A  good  house  cannot  be  built 
except  upon  a  good  foundation.  The  mason-work  above 
may  be  laid  of  the  best  material  and  by  the  best  work- 
men ;  but  if  the  foundation  be  not  sound,  and  sink  at 
each  corner  from  five  to  twenty  inches,  although  the 


18  INTRODUCTION. 

house  shouid  not  fall,  yet  this  movement  of  the  founda. 
tion  will  distort  the  floors,  ceilings,  roof  and  rooms  from 
their  proper  shape  ;  and  no  propping  or  patching  up  of 
floors,  ceilings,  roof  or  rooms  will  ever  make  the  house  a 
good  one.  It  will  be  directly  the  opposite,  it  will  be  a 
poor  one  ;  and  as  the  foundation  continues  to  move,  will 
constantly  need  repairs.  A  valuable  machine  cannot  be 
invented  except  upon  true  mechanical  principles.  Let  a 
man  invent  a  machine  founded  upon  a  false  principle. 
Every  part  of  it  may  be  well  made  of  the  best  ma- 
terial, and  when  finished  it  may  present  a  plausible  ap- 
pearance, yet  it  either  will  not  work  at  all  or  it  will 
work  imperfectly,  and  can  never  be  good  until  it  is 
founded  on  true  mechanical  principles.  The  stability  of 
a  house  shows  the  character  of  its  foundation ;  the 
results  produced  by  a  machine  show  the  worth  or  worth- 
lessness  of  the  principle  on  which  it  was  invented  ;  and 
with  equal  certainty  the  centralization  of  property  in  a 
nation  shows  the  character  of  its  monetary  laws.  If 
great  wrongs  prevail  while  there  is  a  general  conformity 
to  laws  apparently  designed  to  secure  justice,  there 
must  be,  in  spite  of  appearances,  some  defective  law  or 
institution,  which  is  a  sufficient  cause  of  those  wrongs. 
The  general  evils  naturally  and  inevitably  flowing  from 
it  are  easily  seen,  like  the  parts  of  the  building  above 
ground,  and  like  the  wheels  of  the  machine  that  are  open 
to  view,  while  the  great  radical  defect  in  the  ground- 
work may  be  so  hidden  from  public  sight  as  to  attract 
comparatively  little  attention. 

One  of  the  chief  objects  for  which  governments  are 
constituted,  is  to  insure  the  protection  of  the  rights  of 
property.  The  security  of  these  rights  is  essential  to 
the  welfare  of  a  people.  Their  infringement  is  the  cause 
of  nearly  all  legal  procedures.  Such  crimes  as  theft, 
gambling,  fraud  in  business,  bribery  in  courts  of  law, 
etc.,  consist  in  unjustly  obtaining  property  without  ren- 


INTRODUCTION.  19 

dering  an  equivalent.  To  obtain  labor  without  rendering 
a  fair  equivalent,  is  also  a  violation  of  the  rights  of 
property. 

Property  is  almost  entirely  the  product  of  labor,  for 
even  food  of  spontaneous  growth  in  the  seas  or  on  the 
land  cannot  be  gathered  without  labor.  Labor  has 
effected  every  improvement  in  our  country  ;  it  has  built 
our  cities ;  cleared,  fenced,  and  improved  our  farms ; 
constructed  our  ships,  railroads  and  canals.  In  short, 
every  comfort  of  life  is  the  fruit  of  past  or  present  labor. 
If  any  one  is  in  doubt  whether  labor  is  the  actual  pro- 
ducer of  the  wealth,  let  him  consider  what  would  be  the 
situation  of  this  or  any  other  civilized  nation,  if  the 
laborers  should  cease  their  toil  for  the  brief  term  of  five 
years,  letting  the  earth  for  that  period  bring  forth  only 
her  spontaneous  productions.  Let  man  neither  sow  nor 
reap,  let  manufacturing  cease,  commerce  be  suspended, 
and  what  would  be  the  condition  of  our  country  at  the 
end  of  the  five  years  ?  Would  not  a  large  proportion  of 
the  people  have  sunk  into  their  graves  from  starvation  ; 
and  would  not  many  who  were  living  be  almost  naked 
like  the  barbarians  ?  If  the  earth  should  open  her 
chasms  and  spew  out  pure  and  malleable  gold  and  silver, 
as  plenty  as  the  rocks  in  the  mountains,  it  would  afford 
no  relief.  But  if  she  should  cast  out  wheat,  corn  and 
vegetables,  beef,  pork,  mutton,  poultry,  besides  gar- 
ments, houses,  furniture  and  so  forth,  the  people  would 
be  supplied  with  the  means  of  subsistence.  In  such  a 
case  we  might  do  without  the  labor  of  man.  But  if  we 
had  all  the  gold  and  silver  money  and  all  the  paper  obli- 
gations that  have  been  made  from  the  creation  of  the 
world  to  the  present  day,  they  would  not  be  the  least 
substitute  for  the  productions  of  labor ;  and  yet  our 
laws  make  these  legal  instruments  in  the  hands  of  the 
few  to  trample  in  the  dust  the  rights  of  the  laborer,  on 
whom  we  depend  for  every  morsel  of  food  that  we  eat, 


20  INTRODUCTION. 

for  the  clothing  we  wear,  the  houses  we  live  in,  and  in 
fact  for  every  comfort  and  luxury  of  life. 

A  moderate  amount  of  labor  readily  produces  an  abun- 
dant supply  of  necessaries  and  comforts  for  man ;  but  the 
present  distribution  of  these  products  is  such,  that  a  large 
number  of  those  who  labor  much  more  than  their  share 
in  the  production,  receive  a  verr  small  proportion  of  the 
products,  while  the  larger  proportion  accumulates  in  the 
possession  of  those  who  are  employed  neither  in  produc- 
ing nor  in  distributing  them.  The  greater  portion  of  the 
human  family  toil  day  by  day  for  a  scanty  subsistence, 
and  are  destitute  of  the  time  and  means  for  social  and  in- 
tellectual culture.  The  industrious  poor,  as  a  class,  do  not 
obtain  even  a  competence.  Their  destitution  often  in- 
duces them  to  trespass  against  existing  laws,  to  obtain  3 
small  proportion  of  that,  which,  under  just  laws,  would 
be  abundantly  awarded  to  them  as  a  fair  compensation 
for  their  labor.  All  candid  men  will  acknowledge  this 
truth,  that  the  wealth  is  not  distributed  in  accordance 
with  either  the  physical  or  the  mental  usefulness  of  those 
who  obtain  it.  Opposed  to  the  masses  who  live  in  toil  and 
poverty,  is  a  small  proportion  of  the  human  race,  sur- 
rounded by  all  the  appliances  of  luxury,  and  living  in 
comparative  idleness ;  while  their  abundant  means  of  so- 
cial and  intellectual  culture  are  too  often  neglected,  or  ren- 
dered useless  by  indolence  and  self-indulgence.  These 
extremes  of  wealth  and  poverty,  of  luxury  and  want,  of 
idleness  and  labor,  are  great,  somewhat  in  proportion  to 
the  antiquity  of  a  nation,  or  the  length  of  time  that  its 
monetary  law,  or  system,  has  been  in  operation. 

The  wealth  of  this  nation,  like  the  wealth  of  other  na- 
tions, is  rapidly  accumulating  in  the  hands  of  a  compara- 
tively few  persons  in  bur  large  cities.  Still  it  is  indispu- 
table that  cities  are  great  consumers  of  wealth,  while 
they  are  comparatively  small  producers.  The  labor  of 
the  country  furnishes  nearly  the  whole  support  of  the 


INTRODUCTION.  21 

cities.  The  rewards  of  labor  paid  by  the  cities  and  the 
country  respectively  to  each  other,  to  be  justly  recipro- 
cal, ought  to  be  in  proportion  to  the  services  rendered  to 
each  other  ;  but  the  immensely  greater  amount  of  wealth 
flowing  to  the  cities,  and  the  less  to  the  country,  is  clearly 
opposed  to  this  just  reciprocity.  This  will  be  more  ap- 
parent by  supposing  the  large  Atlantic  cities  to  be  cut 
off  from  all  interchanges  with  the  country.  In  a  short 
time  their  citizens  would  be  destitute  of  food,  fuel,  and 
clothing,  for  exchanges  of  their  productions  among  them- 
selves would  do  very  little  toward  supplying  their  wants  ; 
while  the  people  of  the  country  and  the  small  manufac- 
turing towns,  if  they  had  a  just  medium  by  which  they 
could  exchange  their  productions  with  each  other,  would 
have  an  abundant  and  vastly  more  bountiful  supply  than 
at  present  of  nearly  every  necessary  and  luxury  of  h'fe. 
They  would  save  for  their  own  use  nearly  the  whole  dif- 
ference between  what  they  now  produce  for  the  large 
cities,  and  what  these  cities  produce  for  the  country. 
But  even  in  these  cities,  where  a  great  part  of  the  na- 
tional wealth  is  owned,  a  majority  of  the  people  toil  for 
a  scanty  subsistence,  and  thousands  of  miserable  poor  are 
dependent  on  public  charity. 

In  all  probability,  two  thousand  of  the  most  wealthy 
citizens  of  the  city  of  New  York  own  a  greater  amount 
of  real  and  personal  property  than  the  whole  remainder 
of  its  inhabitants.  Their  wealth  is  vested  in  real  estate 
in  the  city  and  country,  in  bank,  railroad,  State,  and 
other  stocks,  loans  of  money,  etc.  Allow  five  persons  to 
form  a  family,  and  the  two  thousand  men  and  their  fami- 
lies would  form  a  population  of  ten  thousand,  or  one  and 
one-quarter  per  cent,  on  eight  hundred  thousand,  the 
present  population  of  the  city.  Upon  this  estimate — and 
a  little  observation  and  reflection  will  show  that  it  is  not 
an  extravagant  one — one  and  one-quarter  per  cent,  of  the 
population  are  worth  as  much  as  the  remaining  ninety- 


22  INTRODUCTION. 

eight  and  three-quarters  per  cent.  Take  the  dispropor- 
tion of  wealth  on  a  greater  amount  of  population.  We 
may  reasonably  estimate  that  a  hundred  and  fifty  thou- 
sand of  the  wealthiest  men  in  the  United  States  own  as 
much  real  and  personal  property  as  the  whole  remainder 
of  the  nation.  Allowing  five  persons  in  a  family,  these 
hundred  and  fifty  thousand  men,  with  their  families,  make 
a  population  of  seven  hundred  and  fifty  thousand,  or  two 
and  a  half  per  cent,  on  thirty  millions,  the  present  popu- 
lation of  the  country.  This  calculation  will  make  two 
and  a  half  per  cent,  of  the  population  own  as  great  an 
amount  of  wealth  as  the  remaining  ninety-seven  and  a 
half  per  cent.  Our  government  professes  to  establish 
laws  for  the  benefit  of  the  whole  people  ;  and  such  laws, 
if  justly  administered,  should  secure  to  every  individual 
a  fair  equivalent  for  his  labor ;  yet  probably  half  the 
wealth  of  the  nation  is  accumulated  in  the  possession  of 
but  about  two  and  a  half  per  cent,  of  the  population,  who, 
to  say  the  most,  have  not  done  more  labor  toward  the 
production  of  the  wealth  than  the  average  of  the  ninety- 
seven  and  a  half  per  cent.,  among  whom  is  distributed  the 
other  half  of  the  wealth. 

Let  those  who  doubt  whether  two  and  a  half  per  cent, 
of  the  population  own  half  the  property  of  the  nation 
select  in  their  own  neighborhood,  or  in  a  village  contain- 
ing, say,  four  thousand  inhabitants,  the  twenty  most 
wealthy  men,  and  see  if  the  twenty  are  not  worth  as 
much  as  all  the  rest.  Or,  if  the  village  contain  ten  thou- 
sand inhabitants,  take  the  fifty  most  wealthy  men,  and 
see  if  they  are  not  worth  as  much  as  all  the  rest.  Allow- 
ing the  families  of  the  fifty  men  to  average  five  persons 
each,  they  would  amount  to  two  hundred  and  fifty  indi- 
viduals— just  two  and  a  half  per  cent,  of  the  population. 
If  it  be  found  that  the  fifty  men  and  their  families  own 
one-half  of  the  property,  then  see  if  they  have  contri- 
buted more  labor  physically,  intellectually,  or  morally, 


INTRODUCTION.  23 

for  the  general  benefit,  than  the  rest  of  the  villagers. 
We  do  not  now  speak  of  what  their  wealth  may  have 
done  in  hiring  others  to  make  improvements,  but  of  the 
improvements  that  the  fifty  men  and  their  families  have 
effected  by  their  personal  labor.  If  they  have  not  accom- 
plished as  much  as  all  the  rest  of  their  townsmen,  and 
yet  own  half  the  wealth  of  the  town,  some  wrong  to  the 
majority  of  the  people  has  been  done.  Not  that  these 
men  have  not  acted  in  as  good  faith,  or  with  as  upright 
intentions  as  other  citizens ;  or  that  others  would  not  be 
equally  glad  to  accumulate  wealth  in  the  same  manner ; 
but  we  ask  how  it  occurs  that  the  comparatively  few 
have  'so  large  a  proportion  ?  They  have  not  earned  it, 
for  they  could  not  have  performed  the  labor  of  building 
half  the  town,  nor  of  providing  half  its  inhabitants  with 
food  and  clothing ;  nor  could  they  have  given  half  the 
instruction  in  the  various  trades  and  in  the  school  educa- 
tion of  the  villagers.  And  if  they  have  not  done  one- 
half  the  labor,  why  is  it  that  they  possess  one-half  the 
property  ?  Why  is  it,  too,  that  we  see  one  industrious 
man  rise  from  poverty  to  wealth,  apparently  because  his 
business  is  prosperous,  and  another  man,  who  is  equally 
diligent  in  an  equally  useful  employment,  remaining  with 
a  mere  subsistence  ? 

These  facts  are  sometimes  attributed  to  the  ignorance 
and  extravagance  of  the  laboring  classes.  But  if  all  our 
people  were  learned  in  Greek  and  Latin,  as  well  as  in 
other  languages  and  in  the  sciences,  the  ground  must 
continue  to  be  tilled,  and  railroads,  houses,  and  so  forth, 
built  by  labor.  Not  all  the  education,  nor  all  the  money 
in  the  world,  would  make  these  improvements  without 
the  physical  labor  ;  and  it  ought  to  secure  to  those  who 
perform  it  a  just  and  much  larger  share  than  it  at  pre- 
sent does  of  all  the  comforts  of  life.  Many  good  scholars 
and  industrious  and  intelligent  men  are  poor,  while  very 
indifferent  scholars  and  rather  ignorant  men  have  often 


24  INTRODUCTION. 

accumulated  fortunes.  The  ignorance  ot  the  laboring 
classes  does  not  account  for  their  poverty.  Nor  does 
want  of  economy  better  account  for  it.  What  oppor- 
tunity has  the  laborer  to  be  extravagant,  when  the  price 
of  his  day's  work  would  hardly  pay  that  day's  board  and 
lodging  in  a  comfortable  house  in  our  cities  ?  Do  the 
factory  operatives  in  England,  France  and  Germany  live 
extravagantly,  or  the  seamstresses  in  London  and  New 
York  ?  They  earn  three,  four  or  five  times  more  products 
than  they  actually  consume,  and  these  go  into  the  pos- 
session of  that  class  of  persons  who  live  comfortably  or 
luxuriously  without  performing  much,  if  any,  productive 
labor,  or  advancing  the  moral  and  intellectual  well-being 
of  society.  The  wealthy  men  of  a  nation  are  not  usually 
those  whose  genius  makes  improvements  in  the  mechani- 
cal arts,  or  who,  by  any  species  of  labor,  contribute 
much  to  actual  production.  Their  attention  is  generally 
directed  to  the  accumulation  of  wealth  by  indirect  means, 
which  do  not  require  labor.* 

The  injustice  of  the  present  distribution  of  products  is 
still  more  conspicuous,  when  we  consider  that  present 
labor  is  indispensable  to  human  existence.  Although  all 
discoveries,  inventions,  and  improvements,  made  by  all 
previous  labor,  are  transmitted,  free  of  expense,  to  suc- 
cessors, yet  the  property,  thus  improved  and  inherited, 
cannot  give  support  without  frresent  labor.  The  sponta- 
neous productions  of  the  earth  cannot  supply  one-twen- 
tieth part  of  the  population  with  food.  Clothing  can  last 
but  a  few  years,  and  buildings,  unless  repaired,  must 
decay.  Therefore,  each  generation  must  in  the  main 
provide  its  own  means  of  subsistence.  If  a  generation 
enact  laws  through  which  one-third  of  the  succeeding 

*  Labor  signifies  toil,  which  produces  or  distributes  something 
actually  useful ;  and  this  is  the  sense  in  which  the  term  is  used  in  this 
volume.  When  toil  is  directed  to  wrong  ends,  it  does  not  deserve 
the  name  of  labor. 


INTRODUCTION.  25 

generation  can  live  in  luxury  without  labor,  then  the 
labor  of  the  other  two-thirds,  besides  supplying  their 
own  necessities,  must  also  supply  the  wants  of  the  first 
third.  Although  the  idle  rich  man  inherits  wealth,  yet 
he  owes  his  present  support  to  the  labor  of  others. 
Others  must  raise  the  grain  that  he  consumes,  manufac- 
ture cloth  for  his  use,  build  his  house,  etc.  If  one-third 
of  a  generation  own  all  the  property,  they  have  the 
means  of  supplying  their  wants  by  labor  upon  their  own 
possessions ;  but  the  two-thirds  who  have  no  property, 
have  not  even  the  means  of  preserving  their  lives,  unless 
the  one-third  allow  them  the  use  of  property  on  which 
to  expend  their  labor. 

In  addition  to  this  evil  of  greatly  centralized  wealth, 
all  civilized  nations  are  every  few  years  visited  with  great 
revulsions  in  trade.  Outstanding  debts  become  unsafe, 
and  many  debtors  bankrupt.  There  is  usually  an  appa- 
rent overstock  of  goods  and  products,  for  which  there  is 
no  ready  market ;  houses  will  not  sell  or  rent ;  manufac- 
tured goods  lie  in  the  stores  and  cannot  be  sold  for  the 
cost  of  making ;  and  therefore  laborers  are  out  of 
employment,  for  why  should  more  be  produced  to 
decrease  still  further  the  ruinous  prices  at  which*  those 
already  in  market  must  be  sold  ?  At  such  periods,  in 
our  cities,  one  house  is  filled  with  families,  one  in  each 
room  from  cellar  to  garret,  and  the  adjoining  house 
stands  empty  for  want  of  tenants  able  to  pay  the  rent. 
Goods  are  piled  up  in  stores  without  sales,  while  great 
numbers  of  the  laboring  community  are  ragged  and  are 
begging  from  door  to  door  for  old  clothes  to*  shield  them- 
selves and  their  families  from  the  piercing  cold,  and  for 
the  crumbs  that  fall  from  the  tables  of  the  rich  to  keep 
them  from  starving.  When  people  look  about  to  ascer- 
tain the  cause  of  these  things,  seeing  houses  and  stores 
untenanted,  and  great  quantities  of  agricultural  products 
2 


26  INTRODUCTION. 

and  manufactured  goods  on  hand  for  which  there  appears 
to  be  no  market,  they  generally  come  to  the  conclusion 
that  over-production  and  over-trading  have  caused  these 
calamities.  If  this  be  really  the  case,  public  measures 
should  be  taken  to  avert  such  disasters,  by  preventing 
an  excess  of  labor.  Is  it  not  strange  that  at  the  times 
•when  the  apiount  of  surplus  production  is  a  subject  of 
national  lamentation,  the  people  who  produce  by  their 
labor  the  very  things  which  they  need  for  their  own  use 
and  comfort,  are  the  ones  who  are  often  destitute  of 
them ;  while  a  few  capitalists  who  do  little  or  nothing 
toward  the  production  and  distribution,  are  supplied  with 
all  the  comforts  and  luxuries  of  life  at  half,  or  less  than 
half  their  usual  price  ?  But  a  surplus  of  cotton  has  never 
remained  because  no  one  needed  it.  In  1844,  nearly 
sixty  thousand  citizens  of  New  York  received  the  aid  of 
public  charity.  All  these  needed  additional  cotton  cloth- 
ing. At  least  one-half  the  population*of  the  whole  country 
would  have  made  a  yearly  purchase  of  five  dollars'  worth 
of  additional  cotton  clothing,  if  they  could  have  spared 
the  means  from  their  earnings.  In  one  year  ten  millions 
of  persons  would  have  consumed  850,000,000  worth  of 
cottoh  clothing,  in  addition  to  the  previous  quantity. 
Cotton  would  then  have  maintained  a  good  price,  and  the 
crops  would  have  been  consumed.  If,  during  the  years 
included  between  1837  and  1844,  the  laborers  in  the  city 
of  New  York  and  its  vicinity,  whose  occupation  was  the 
building  of  houses,  had  been  furnished  with  the  work 
which  they^  would  have  been  willing  to  perform,  they 
would  have  built  a  house  for  nearly  every  poor  family 
in  the  city.  If  the  unemployed  laborers  in  the  districts 
where  the  materials  for  building,  bricks,  mortar,  timber, 
boards,  nails,  etc.,  are  usually  prepared,  had  been  set  at 
work,  the  materials  might  have  been  furnished,  and  the 
buildings  erected  and  paid  for  by  labor.  The  laborers, 


INTRODUCTION.  27 

too,  would  have  been  much  happier,  for  they  begged  for 
work  without  obtaining  it,  and  many  were  dependent  on 
public  charity. 

It  is  plain  that  there  can  be  no  real  over-production 
unless  a  large  surplus  remains  after  all  the  people  have 
been  fully  supplied  with  the  necessaries  and  comforts  of 
life.  The  public  cannot  over-trade  by  distributing  each 
year's  productions  among  those  who  really  need  them  to 
use.  Too  high  prices  cannot  be  paid  for  labor,  unless 
the  laborers  in  general  actually  gain  more  than  their 
equitable  share  of  the  year's  productions.  Neither  can 
there  be  an  over-stock  of  laborers  so  long  as  thousands 
are  suffering  for  want  of  the  very  articles  these  laborers 
would  gladly  produce,  if  they  could  be  employed.  There 
cannot  be  too  many  houses,  when  they  would  be  filled 
with  tenants  able  to  pay  the  rent  if  work  could  be 
obtained.  We  must  look  for  the  real  cause  of  these 
calamities,  not  in  over-production,  but  in  the  power  that 
governs  the  distribution  of  the  products. 

But,  taking  another  view  of  the  subject,  it  may  be 
said  that  we  are  a  free  people,  and  many  suppose  we 
enjoy  all  the  rights  that  a  government  can  confer.  Every 
one  employs  himself  in  labor,  trade,  speculation,  or  other- 
wise, according  to  his  own  choice;  sells  his  labor  or 
products  at  such  prices  as  he  can  obtain,  and  buys  the 
labor  and  products  of  others  at  prices  that  he  agrees 
to  pay.  Our  government  is  also  deemed  beneficent 
because  poor-houses  and  schools  *  are  provided  for  the 

*  In  the  various  States,  a  tax  is  levied  to  provide  schools  for  the 
children  of  the  laboring  classes.  Under  existing  laws,  this  species 
of  charity  is,  doubtless,  very  important.  But  wealth  being  the  pro- 
duct of  labor,  the  laborers  should  have  abundant  means  to  educate 
their  children;  and  if  a  fund  be  established  for  the  purposes 
of  education,  it  should  be  necessary  for  those  only  who  are  unable 
or  unwilling  to  labor.  It  is  unreasonable  for  the  laws  to  be  such  as 
to  compel  the  producers  of  wealth  to  ask  alms  of  non-producers. 


28  INTRODUCTION. 

needy.  If  a  farmer  or  a  mechanic  should  be  told  that 
our  laws  oppressed  him,  probably  he  would  say,  that 
he  worked  at  what  he  pleased,  and  sold  either  his  labor 
or  its  products  to  whom  he  pleased,  and  had  no  law- 
suits, and  therefore,  the  laws  did  not  in  the  least 
infringe  his  rights,  and  would  not  those  of  any  other 
man  who  was  upright  in  his  dealings.  The  laboring 
classes  make  their  own  bargains  with  capitalists,  and  one 
another;  and  all  are  equally  protected  in  the  property 
which  they  lawfully  acquire.  Why  then  do  not  laborers 
get  all  they  are  justly  entitled  to  receive?  Looking  at 
the  matter  in  this  light,  it  wears  an  appearance  of  freedom 
and  equal  justice;  yet  results  prove  the  existence  of 
some  radical  wrong  lying  below  this  surface  view. 
For  we  all  know  that  wealth  is  produced  by  labor,  and 
that  the  people  of  the  country  send  the  best  products 
of  their  incessant  toil  to  supply  the  luxuries  of  the 
wealthy  in  cities ;  and  that  the  laborers  in  these  cities 
build  splendid  mansions  for  the  opulent,  and  poor  tene- 
ments for  themselves,  most  of  which  are  also  owned  by 
capitalists,  and  rented  to  their  occupants.  True,  all  this 
labor  is  paid  for  by  capitalists  according  to  their  agree- 
ments with  laborers';  yet,  notwithstanding  these  volun- 
tary agreements  according  to  the  law  of  supply  and 
demand,  the  wealth  of  the  nation  continues  to  accumulate 
in  large  fortunes  in  the  hands  of  a  comparatively  few 
non-producers,  leaving  a  very  large  number  of  its  actual 
producers  in  poverty.  These  are  facts  that  stand  out  to 
public  view,  and  cannot  be  denied.  Freedom  of  contract, 
choice  of  location  and  occupation,  and  protection  of 
property,  are  manifestly  proper  and  right,  and  ought  to 
be  enjoyed  by  every  people ;  yet  we  see  they  fail,  and 
entirely  fail,  to  secure  any  equitable  distribution  of 
property,  and  any  adequate  compensation  for  labor. 
They  fail  for  the  same  reason  that  good  materials  and 
workmanship  on  a  bad  foundation  fail  to  make  a  good 


INTRODUCTION.  29 

house.  Their  foundation  is  unsound  and  variable, 
perverting  their  natural  good  tendencies,  and  engendei*- 
ing  defects  corresponding  with  their  wrong  basis.  A 
bad  foundation  for  a  house  affects  the  edifice  above,  and 
the  few  individuals  who  are  interested  in  its  building  and 
use.  A  machine  not  founded  on  true  mechanical 
principles,  affects  the  few  who  own  it,  and  those  interested 
in  its  working.  But  a  national  standard  of  value  like 
money,  which  forms  the  foundation  of  contracts,  and 
regulates  the  award  of  property,  thus  greatly  modifying 
and  limiting  all  minor  rights  of  freedom  of  contract, 
location  and  occupation,  and  which  a  whole  nation  is 
compelled  to  use,  must,  if  it  be  variable  and  uncertain, 
affect  injuriously  the  interests  of  every  individual, 
family  and  association,  as  far  as  the  money  circulates. 

The  present  rates  of  interest  on  money  enable  the  owners 
of  property  to  demand  an  undue  proportion  of  the  products 
of  labor  for  the  use  of  property,  and  laborers  are  compelled 
to  make  their  agreements  with  them  under  these  circum- 
stances. Undoubtedly  both  parties  are  governed  by 
their  own  interests  in  making  their  agreements  ;  but  the 
circumstances  under  which  contracts  are  made,  render 
them  very  unjust  toward  laborers.  Suppose  one  of  the 
contracting  parties  to  be  in  water,  where  he  must  drown 
unless  he  receive  assistance  from  the  other  party  who  is 
on  the  land.  Although  the  drowning  man  might  be  well 
aware  that  his  friend  on  shore  was  practising  a  very 
grievous  extortion,  yet,  under  the  circumstances,  he 
would  be  glad  to  make  any  possible  agreement,  to  be 
rescued.  The  monetary  laws  of  nations  have  depressed 
the  producing  classes  to  a  similar  state  of  dependence 
upon  capitalists,  and  they  are  similarly  obliged  to  make 
their  contracts  with  them  under  great  disadvantages. 
A  very  large  proportion  of  the  people  are  actually 
wronged  out  of  their  property,  and  the  earnings  of  their 
labor,  by  the  operation  of  the  laws,  although  their  con- 


30  INTRODUCTION. 

tracts  are  voluntarily  made,  and  honestly  fulfilled. 
Neither  of  the  contracting  parties  may  know  that  either 
is  injured  by  the  laws,  although  both  may  be  sensible 
that  justice  is  really  not  done  them. 

In  all  ages  and  nations,  philanthropic  men  have  endea- 
vored to  devise  some  means  of  securing  to  labor  a  bettor 
compensation.  Labor-saving  machines  have  been  in- 
vented ;  associations  have  been  formed  for  the  purpose 
of  producing  with  less  labor,  the  earnings  being  equita- 
bly distributed,  according  to  the  work  performed.  But 
these  benevolent  efforts  have  failed  of  any  general  success. 
The  reason  is  this :  no  individuals,  nor  associations  of  indi- 
viduals, can  withdraw  their  labor  or  their  products  from 
the  influence  of  the  national  laws  which  regulate  distribu- 
tion. The  great  disparity  in  the  conditions  of  the  rich 
and  poor  is  the  natural  result  of  unjust  laws,  and,  there- 
fore, this  disparity  must  continue  so  long  as  these  laws 
are  in  force.  If,  however,  a  father  should  so  dispose  of 
his  property,  that  all  his  children,  except  one,  should  be 
compelled  to  work  twelve  or  fourteen  hours  a  day  for  a 
mere  subsistence,  while  one  son  should  receive  an  im- 
mense fortune,  which  would  supply  him  with  every  luxury 
without  toil,  the  injustice  and  injury  to  both  parties 
would  call  forth  the  censure  of  every  right  thinking  per. 
son.  A  government  is  no  more  justifiable  in  legislating 
so  as  to  produce  these  results,  than  a  father  is  justifiable 
in  a  similar  treatment  of  his  children.  Governments  are 
established  to  protect  the  just  rights  of  the  governed,  as 
much  as  a  father  holds  his  position  to  protect  the  just 
rights  of  each  child. 

Present  laborers,  who  produce  present  products, 
should  receive  a  very  large  proportion  of  them,  and 
capitalists  who  do  not  labor,  should  receive  a  corre- 
spondingly small  proportion.  How  shall  this  change 
in  the  reward  of  labor  and  capital  be  effected?  Shall 
laws  be  made  to  determine  the  prices  of  various  kinds  of 


INTRODUCTION.  31 

labor,  and  thus  prevent  the  laborer  and  employer  from 
making  contracts  upon  their  own  terms  ?  This  would  be 
impracticable,  and,  if  practicable,  not  desirable.  Each  man 
should  be  at  liberty  to  make  his  own  contracts.  There 
is  no  need  of  interference  with  this  liberty,  in  order  to 
prevent  capital  from  taking  too  large  a  proportion  of  the 
products  of  labor. 

The  unfair  distribution  of  wealth  is  caused  by  an  un- 
just legal  standard  of  distribution.  Distribution  is  re- 
gulated and  effected  by  the  standard  of  value,  which  is 
money.  Money,  as  will  be  hereafter  shown,  exercises 
astonishing  power  throughout  every  department  of  busi- 
ness and  industrial  occupation.  When  monetary  laws 
shall  be  made  equitable,  present  labor  will  naturally  re- 
ceive a  just  proportion  of  present  products,  and  capital 
will  likewise  receive  a  just  reward  for  its  use. 

The  necessity  for  the  exchange  of  commodities  is  gen- 
erally acknowledged.  Few,  however,  even  among  think- 
ing men,  are  aware  how  indispensable  these  exchanges 
are  to  the  subsistence  and  comfort  of  the  human  family. 
Men  are  social  beings,  and  mutually  dependent.  To 
appreciate  this  important  truth,  we  must  consider  the 
inability  of  each  man  to  provide  for  the  numerous  wants 
of  his  nature ;  and  the  ignorance  and  discomfort  to 
which  each  would  be  exposed,  were  he  not  benefited  by 
the  labor  of  others.  If  every  man  could  build  his  own 
house,  furnish  his  own  food  and  clothing,  and  make  all 
the  instruments  and  utensils  that  he  needs  to  use  :  if  the 
materials  for  all  these  things  were  placed  upon  every  acre 
of  land,  and  every  man,  woman  and  child,  were  endowed 
with  sufficient  skill  and  strength  to  produce  them,  there 
might  be  no  need  of  an  exchange  of  commodities. 

But  all  men  are,  in  many,  in  most  things,  dependent 
on  the  labor  of  their  fellow  men.  For  example,  take 
the  farmer,  who  is  acknowledged  to  be  the  least  depen- 


32  INTBODTTCTION. 

dent  of  men,  and  see  for  how  many  things  even  he  is 
indebted  to  the  labor  of  others.  He  must  have  imple- 
ments for  the  cultivation  of  his  farm,  a  plough,  harrow, 
shovel,  hoe,  sickle,  cradle,  scythes,  a  fan,  or  fanning-mill, 
and  a  cart  or  wagon.  The  farmer  is  dependent  on  the 
miner  for  the  iron  ore ;  on  the  collier  to  dig  the  coal ;  on 
the  furnace-worker  to  smelt  the  iron ;  and  on  the  forger 
and  the  smith  to  make  his  iron  and  steel  instruments. 
He  is  dependent  on  the  wagon-maker  for  his  wagon ;  on 
the  machinist  for  his  farming-mill ;  on  the  carpenter  for 
his  house ;  on  the  nail-maker  for  nails ;  on  the  glass- 
manufacturer  for  glass ;  on  the  stone-cutter  and  the 
mason  for  mason- work ;  on  the  brick-maker  for  bricks ; 
on  the  cooper  for  barrels,  tubs,  and  pails ;  on  the  saw- 
maker  for  a  saw,  and  on  the  rolling-mill  to  roll  out  the 
iron  or  steel  for  it ;  on  the  tin-plate-worker  for  kitchen 
utensils ;  on  the  moulder  and  caster  of  iron  for  iron 
pots ;  on  the  miner  of  copper,  and  on  the  copper  and 
brass  founder  for  brass  and  copper  kettles  ;  on  the  pump- 
maker  for  a  pump,  etc.,  etc.  He  is  dependent  on  the 
needle-maker,  the  pin-maker,  the  button-maker,  the  silk- 
grower,  the  tanner,  the  shoe-maker,  the  hatter,  the  saddle 
and  harness-maker,  the  cabinet-maker,  and  the  type- 
maker,  type-setter,  and  printer.  Not  one  of  these 
artisans,  in  attending  to  his  particular  employment, 
produces  his  food  and  clothing  ;  and  all  would  be  desti- 
tute of  them,  unless  supplied  with  them  by  the  labor  of 
others  The  farmer  raises  all  his  food,  except  salt,  tea, 
coffee,  sugar,  molasses,  spices  and  the  like ;  these, 
and  the  ships  to  transport  them,  must  be  furnished  by 
others.  These  wants  call  into  employment  ship-cai'pen- 
ters,  sailors,  compass-makers,  surveyors,  chart-makers, 
etc.  The  farmer  must  raise  wool,  cotton,  hemp,  or  flax, 
or  else  be  dependent  on  others  for  clothing.  If  the 
farmer,  who  is  the  least  dependent  of  men,  receives  from 
others  so  many  supplies,  how  is  it  with  the  hatter  and 


INTRODUCTION.  33 

the  shoe-maker  ?  The  former  makes  an  article  to  cover 
the  head,  the  latter  one  to  cover  the  feet ;  and  all  the 
additional  supplies  of  both  must  be  furnished  by  the 
labor  of  others.  Artisans,  too,  depend  upon  each  other 
for  the  different  parts  of  their  work  ;  the  cotton  manu- 
facturer must  be  assisted  by  others  to  carry  forward  his 
manufacture.  Many  articles,  such  as  watch-springs,  are 
useless  unless  they  are  combined  with  other  parts.  It 
is,  then,  of  paramount  importance  that  no  obstacles  be 
thrown  in  the  way  of  a  ready  exchange  of  commodities. 
A  certain  quantity  of  one  kind  of  produce  is  worth  as 
much  as  a  certain  quantity  of  another  kind ;  and  all 
civilized  nations  have  adopted  some  medium  by  means 
of  which  all  kinds  of  produce  may  be  more  easily  ex- 
changed than  by  direct  barter.  We  hear  it  sometimes 
asserted  that  there  is  no  need  of  a  medium  of  exchange. 
But  the  articles  of  trade  could  not  be  divided  and  distri- 
buted to  supply  the  numerous  wants  of  a  people  without 
a  representative  of  value  through  which  the  distribution 
could  be  made.  For  example,  a  man  brings  to  market 
five  hundred  bushels  of  wheat.  The  purchaser  tenders 
corn  in  payment ;  and  they  agree  that  seven  hundred 
and  fifty  bushels  of  corn  are  worth  as  much  as  five 
hundred  bushels  of  wheat.  The  seller  can  use  but  a 
small  portion  of  the  corn,  and  finds  a  purchaser,  with 
whom  he  exchanges  the  surplus  for  hams.  He  disposes 
of  the  hams  for  hats  and  shoes.  If  he  endeavor  to 
divide  the  hats  and  shoes,  and  exchange  them  for  the 
articles  that  he  needs,  he  may  spend  two  years  before  he 
can  return  to  his  farm  to  raise  a  second  crop  of  wheat. 
Yet  he  is  fairly  dealt  with.  All  those  with  whom  he 
exchanges,  give  him,  as  neavly  as  possible,  an  equivalent 
of  actual  value  for  the  actual  value  that  they  receive ; 
and  all  the  articles  are  such  as  all  need.  In  fact,  all 
trade  is  simply  a  barter  of  one  useful  thing  for  another. 
A  person  who  produces  more  of  an  article  than  he  needs 
2* 


34:  INTRODUCTION. 

for  his  own  use,  exchanges  his  surplus  for  the  surplus 
articles  of  others.  If  the  farmer  had  sold  the  wheat  for 
money,  the  money  would  have  been  a  tender  for  any 
other  article  that  he  wished  to  purchase. 

The  value  and  prices  of  all  products  are  estimated  by 
money,  the  legal  standard  of  value.  In  making  out  a 
bill,  the  articles  sold  are  set  down  at  the  prices  agreed 
upon,  extended  and  footed  up,  and  they  amount  to  so 
much  money.  How  could  contracts  for  various  articles 
be  made,  and  bills  of  them  be  made  out  and  summed  up, 
without  money  ?  Should  it  be  said  that  a  pint  of  Indian 
corn  was  equal  to  four  rows  of  pins,  and  a  pound  of  cot- 
ton to  twenty  needles  ;  and,  if  so,  must  there  not  be  a 
description  of  the  quality  of  the  pins  and  needles,  as  well 
as  of  the  cotton  and  corn  ?  If  it  should  be  said  that 
ten  pounds  of  sugar  were  of  equal  value  with  a  boy's 
cap,  would  it  not  be  necessary  to  describe  the  quality  of 
the  sugar,  as  well  as  the  material,  workmanship,  and  size 
of  the  cap,  in  order  to  make  the  contract  just  ?  A 
standard  of  value  is  manifestly  indispensable  to  a  just 
and  convenient  exchange  of  commodities. 

Monetary  laws  are  the  most  important  that  are  enacted  ; 
for,  by  these  laws,  money  is  made  the  tender  for  debts 
and  the  medium  of  exchange  for  products.  All  indi- 
viduals are  compelled  to  found  their  contracts  for  the 
necessaries  of  life  upon  the  standard  fixed  by  law.  How- 
ever good  the  intentions  of  the  parties,  their  contracts 
will  partake  of  the  evil  of  the  monetary  laws  upon  which 
they  are  founded,-  and  every  law  that  goes  to  support 
the  fulfilment  of  the  contracts  will  partake  of  the  same 
evil.  We  have  laws  to  prohibit  the  fulfilment  of  con- 
tracts made  upon  certain  acknowledged  unjust  principles. 
Contracts  made  in  gambling  are  void  in  law.  In  gam- 
bling, each  player  stakes  a  certain  sum,  and  all  agree 
that  the  winner  shall  take  the  whole.  This  contract, 
would  be  perfectly  fair  or  just,  if  the  first  or  fundamental 


INTRODUCTION.  35 

principle  were  just.  But  the  principle  upon  which 
gambling  is  founded  is,  that  what  one  gains,  others  lose ; 
for  no  production  is  made  by  gambling,  and  no  equiva- 
lent is  given  to  losers  for  their  money.  The  laws  make 
money  the  foundation  for  all  business  contracts.  The 
value  of  this  foundation  is  unjust  and  continually  vary- 
ing ;  so  that  parties  in  fulfilling  their  contracts  are  com- 
pelled to  give  either  more  or  less  than  a  just  equivalent  for 
their  purchases.  The  results  of  all  contracts  are  as  vary- 
ing and  unjust  as  their  foundation.  The  continual  fluc- 
tuations in  the  value  of  money  make  a  sort  of  gambling 
system  of  all  trade. 

For  an  example  of  the  effects  of  variations  hi  the  value 
of  money,  suppose  the  bonds  of  the  government  be 
issued,  payable  in  twenty  years,  and  bearing  six  per  cent, 
interest.  If  we  had  no  foreign  market  for  these  bonds, 
and  the  interest  on  money  in  our  own  country  were  unalter- 
ably fixed  at  six  per  cent.,  the  bonds  would  be  worth 
exactly  par,  and  would  continue  of  the  same  value 
throughout  the  twenty  years.  But  if  the  interest  on 
money  should  rise  to  nine  per  cent.,  and  to  obtain  a  loan 
at  that  rate  the  best  security  were  required,  the  govern- 
ment bonds  would  fall,  and  would  not  be  good  security 
for  more  than  three-fourths  of  their  par  value.  If  the 
government  issue  a  bond  at  par,  and,  by  pressure  in 
the  money  market,  the  holder  be  compelled  to  sell  it 
at  three-fourths  of  its  par  value  to  meet  his  engagements, 
the  government  takes,  or  allows  others  to  take,  one- 
fourth  of  his  money,  for  which  he  no  more  receives  an 
equivalent  than  the  gambler  receives  an  equivalent  when 
he  gambles  away  one-fourth  of  his  money.  The  govern- 
ment reserves  the  right  to  coin  money  and  regulate  its 
value,  and  yet  allo\vvs  its  value  to  change  incessantly,  and 
thus,  by  its  o\vii  acts,  deprives  a  man  of  a  fourth  of  his 
money  without  rendering  to  him  any  equivalent. 

Under  our  present  monetary  laws,  when  interest  is  lo  w 


36  INTRODUCTION. 

and  money  plenty,  if  a  contract  be  made  for  the  purchase 
of  a  farm,  of  which  one-half  the  purchase  money  is  to  be 
left  on  mortgage  for  a  term  of  years,  the  purchaser  runs 
nearly  as  great  a  hazard  of  losing  a  large  proportion  of 
the  money  that  he  pays  for  the  farm,  as  if  he  had  staked 
the  amount  on  the  turning  of  dice.  For  if,  at  the  time 
the  money  becomes  due,  interest  should  be  as  high  as  it 
was  from  1837  to  1840,  it  is  doubtful  whether  the  farm 
would  sell  for  enough  to  pay  one-half  the  purchase  money 
remaining  on  mortgage.  The  farmer's  loss,  in  this  case, 
would  be  owing  entirely  to  the  change  in  the  value  of 
the  dollar,  and  not  to  any  change  in  the  actual  value  of 
the  farm ;  for  the  farm  would  produce  as  good  a  crop 
as  if  money  had  continued  to  bear  a  uniform  interest  of 
six  per  cent.  The  laws  of  the  United  States  are  sup- 
posed to  be  highly  favorable  to  productive  industry ;  but 
the  standard  which  regulates  and  effects  distribution  is 
so  made  as,  in  a  great  degree,  to  defeat  its  own  object, 
and  to  exert  a  disadvantageous  influence  upon  produc- 
tion. The  effects  of  high  and  varying  rates  of  interest 
upon  all  classes  of  producers  will  be  hereafter  more  fully 
exhibited. 

Among  political  economists,  the  nature  and  regulation 
of  money  appear  to  have  been  subjects  of  the  utmost 
difficulty.  "We  have  no  full  account  of  its  functions,  and 
no  satisfactory  answer  to  the  numerous  and  perplexing 
questions  which  arise  concerning  its  value  and  regulation. 
The  alternate  abundance  and  scarcity  of  money,  and  the 
variations  of  interest,  are  supposed  to  be  irremediable 
evils.  It  would  seem  that  gold  and  silver  coins  inhe- 
rently possess  a  mysterious  power,  which  defies  all  regu- 
lation, and  renders  impossible  a  comprehensible  monetary 
system.  It  is  doubtless  true,  that  while  the  nature  of  a 
thing  is  not  understood,  all  attempts  to  regulate  it  must 
prove  ineffectual,  and  legislative  bodies  have  hitherto  in- 
stituted money  in  a  very  imperfect  way.  The  money  of 


INTRODUCTION.  37 

a  nation,  instead  of  being  a  power  "by  which  a  few  capi- 
talists may  monopolize  the  greater  part  of  the  earnings 
of  labor,  ought  to  be  a  power  which  should  distribute 
products  to  producers,  according  to  their  labor  expended 
in  the  production. 

The  labor-saving  machines  that  have  been  invented 
within  the  last  half  century,  have  greatly  facilitated  pro- 
duction. Improvements  in  implements  of  husbandry 
have  materially  lessened  agricultural  labor  ;  and  most 
articles  manufactured  by  machinery  are  made  with  less 
than  one-fourth  of  the  labor  that  was  formerly  required. 
We  should  naturally  suppose  that  these  improvements 
would  be  a  great  relief  and  advantage  to  the  laboring 
classes ;  and  that  they  would  feel  grateful  to  those  who 
have  studied  out  the  laws  of  nature  and  invented  the 
machines.  Yet  both  the  inventors  of  machinery,  and  the 
operatives,  in  general,  continue  to  toil  on  in  want,  and 
many  of  them  have  neither  means  nor  leisure  to  educate 
their  children.  Increased  facility  in  production  seems  to 
increase  the  number  and  multiply  the  wants  of  those  who 
live  in  idle  luxury,  instead  of  affording  the  desired  relief 
to  actual  producers.  Fifty  years  ago,  the  farmers  raised, 
carded  and  spun  their  wool ;  they  raised  flax  and  spun 
most  of  their  linen ;  and  cotton  was  also  mostly  carded 
and  spun  by  each  family  to  supply  its  own  wants.  Now, 
farmers  who  raise  wool,  cotton  and  flax,  sell  the  raw 
materials,  which  often  pass  through  a  number  of  hands 
before  they  reach  the  manufacturer.  The  manufactured 
goods  again  pass  through  several  hands  before  they  reach 
the  consumer.  Machinery  has  collected  the  people  into 
towns  and  villages  to  work  in  large  factories,  where  they 
sell  their  labor,  and  buy  their  board  and  clothing- 
This  greatly  augments  the  necessity  for  the  exchange  of 
goods — the  more  machinery  the  greater  the  necessity  for 
exchanges  of  products — yet  there  has  been  no  new  inven- 
tion in  financial  affairs,  by  which  the  exchange  may  be 
more  equitably  and  easily  made.  True,  we  have  increased 


38  INTRODUCTION. 

the  amount  of  gold  and  silver  coins,  and  the  number  of 
banks,  bank-notes,  and  money-brokers,  but  this  is  no 
more  an  improvement  in  the  medium  of  distribution,  than 
an  increase  in  the  number  of  pack-horses  on  the  old 
muddy  roads  would  be  an  improvement  in  conveying 
products,  while  it  would  still  take  the  same  muscular 
power  to  convey  a  given  weight.  A  railroad  made  and 
a  steam-engine  substituted  for  horses  and  oxen,  are  great 
improvements  in  the  mode  and  means  of  transportation. 
Though  the  quantity  to  be  conveyed  may  be  increased 
tenfold,  railroads  and  steam-engines  will  fulfil  all  re- 
quirements ;  whereas  if  we  depended  on  an  increased 
number  of  horses  and  oxen,  want  of  teams  and  bad  roads 
would  often  cause  great  inconvenience.  But  110  inconve- 
nience of  this  kind  could  equal  that  experienced  by  the 
producers  in  consequence  of  the  defects  of  our  monetary 
system.  Just  monetary  laws  are  of  more  importance  to 
the  laboring  classes  than  all  the  machinery  that  has  been 
invented  during  the  last  fifty  years.  And  when  the 
needed  reformation  is  made,  the  producing  classes,  who 
will  gain  the  benefit  of  all  improvements,  will  rejoice  at 
every  advance  in  machinery,  and  the  inventors  will  be 
hailed  as  the  benefactors  of  man. 

Many  people  seem  to  be  opposed  to  innovation. 
They  do  not  consider  that  all  improvements  in  the  mecha- 
nical arts,  or  in  laws,  are  innovations  upon  former  things 
and  former  laws.  The  establishment  of  our  republican 
government  was  an  innovation  upon  monarchies.  Peo- 
ple do  believe  that  changes  may  be  made  for  the  better, 
for  each  year  they  assemble  legislative  bodies  to  remodel 
old  laws,  and  to  make  new  ones.  Every  modification 
of  a  law  is  an  innovation,  and  every  new  law  is  an  innova- 
tion upon  former  laws.  Every  moral  improvement  is  an 
innovation  upon  the  previous  evil.  Those  who  talk 
against  innovation  are  often  great  innovators.  They  are 
doing,  or  advocating  something  to  improve  the  condition 
of  man. 


INTRODUCTION.  39 

The  antiquity  of  laws  and  customs  is  not  a  proof  of 
their  excellence.  In  all  ages,  and  in  all  nations  the  pro- 
ducing classes  have  been  ill  paid  for  their  labor.  Let  us 
no  longer  recur  to  ancient  laws  and  usages  to  uphold  our 
unjust  standard  of  distribution.  Our  producing  classes 
are  vastly  more  interested  in  knowing  how  the  products 
of  their  own  daily  labor  are  disposed  of,  than  in  knowing 
how  the  ancients  disposed  of  theirs.  We  cannot  alter  the 
evils  of  the  past ;  we  must  act  for  the  present  and  the 
future.  Suppose  a  legislature  enact  a  law  which  gives  a 
certain  part  of  their  constituents  great  advantages  over 
the  remainder.  They  discover  the  error,  and  amend  the 
law  so  as  to  operate  equally  upon  all.  The  alteration  is 
not  an  infringement  of  the  rights  of  those  who  received 
undue  advantages  from  the  former  law.  It  only  renders 
justice  to  those  previously  injured.  Money  is  as  much 
the  representative  of  the  property  of  the  people,  as  the 
legislature  are  the  representatives  of  their  constituents. 
Its  erroneous  construction  and  undue  power  have  made  a 
few  rich,  and  have  plunged  thousands  into  poverty. 
They  have  sent  hundreds  to  premature  graves,  starved 
the  widow  and  the  orphan,  and  given  untold  wealth  to 
the  miser.  They  have  been  the  cause  of  incalculable 
moral  and  social-  evils.  It  is  not  to  be  understood  that 
those  who  now  possess  the  wealth  are  worse  than  others 
who  do  not  possess  it,  or  that  others,  if  they  could  have 
obtained  it,  would  not  have  appropriated  it  in  the  same 
manner.  But  one  thing  is  certain,  that  an  enormous  and 
universal  wrong  exists,  which  nothing  but  an  entire 
change  of  our  laws,  respecting  money,  can  remedy. 
Money  is  the  national  standard  of  distribution,  there- 
fore the  evils  inevitable  upon  its  present  institution,  are 
national  evils,  which  can  only  be  removed  by  the  action 
of  the  general  government. 

"A  defective  standard  will,  doubtless,  appear  to  many 
an  inadequate  cause  for  the  wide  spread  wrongs  of  unjust 


40  INTRODUCTION. 

distribution  ;  but  the  fact  can  be  established  by  the  clear- 
est proof,  and  such  will  be  adduced  in  the  progress  of 
the  work.  It  will  also  be  shown,  that  a  safe  and  just 
monetary  system  can  be  easily  established  by  the  govern- 
ment, which  will  so  regulate  the  standard,  that  the  general 
distribution  of  products  will  be  in  accordance  with  actual 
earnings.  When  the  farmers  and  mechanics,  and  other 
producers,  and  laborers,  understand  the  system  which  is 
to  be  developed,  and  perceive  its  adequacy  to  secure  to 
them  a  just  compensation  for  their  labor,  they  will  as 
surely  cause  it  to  be  put  in  operation,  as  they  would 
send  their  products  to  Philadelphia  or  Boston,  rather 
than  to  New  York,  if  in  the  former  markets  they  could 
sell  them  for  a  third  more  than  in  the  latter. 

The  correction  and  due  regulation  of  money  will  make 
no  change  in  the  present  ownership  of  property.  The 
changes  effected  by  the  establishment  of  a  sound  mone- 
tary system  will  be  gentle,  immediate,  gradual,  sure. 
Only  such  will  ensue  as  will  naturally  result  from  secur- 
ing to  the  laborer  a  fair  compensation.  Its  object  will 
be  to  protect  producers  in  their  rights,  and  not  to  re- 
taliate for  past  injuries.  No  agrarian  distribution  will 
be  necessary,  but  a  just  standard,  that  will  at  once  begin 
to  regulate  the  distribution  of  products,  so  as  to  reward 
the  labor  performed,  and  which  will  in  process  of  time 
distribute  property  in  accordance  with  individual  and 
general  rights  and  interests.  Although  the  bearings  of 
money  upon  labor  may  be  deemed  a  somew'hat  dry  sub- 
ject, yet,  under  its  present  new  aspect,  it  is  believed  that 
it  will  prove  deeply  interesting  to  all  classes.  The 
patient  and  continuous  attention  of  the  reader  is  soli- 
cited to  the  important  facts  and  principles  now  to  be 
presented  relative  to  the  uses  and  abuses  of  money,  and 
to  the  new  plan  to  be  suggested  for  its  institution  and 
regulation. 


PART    I. 
THE  PRINCIPLES    OF  DISTRIBUTION. 

CHAPTER  I. 

OP   VALUE. 

VALUE  consists  in  use  ;  it  is  that  property,  or  those 
properties,  which  render  anything  useful.  A  house 
that  could  not  be  occupied  would  be  worthless,  unless 
its  materials  could  be  employed  for  some  other  purpose. 
A  horse  is  valued  for  his  useful  qualities ;  if  he  becomes 
disabled,  he  is  worthless,  for  his  use  is  destroyed.  So  of 
everything  necessary  to  the  support  and  comfort  of  man, 
it  is  valuable  because  it  is  useful. 

The  same  is  true  of  ornaments.  They  are  valuable 
because  they  are  useful  for  ornamental  purposes.  If 
diamonds  were  deprived  of  their  beauty,  their  use,  and 
therefore  their  value,  as  ornaments,  would  cease  to 
exist.  A  valuable  portrait  might  be  rendered  worthless 
by  erasing  the  features.  The  canvas  and  the  paint,  the 
material  of  the  picture,  would  remain,  but  its  use  would 
be  destroyed. 

The  value  of  all  property  is  estimated  by  its  useful- 
ness. For  instance,  the  income  that  a  city  lot  can  be 
made  to  produce,  determines  its  value.  The  interest  on 


42  OF   VALUE. 

the  money  that  its  improvement  will  cost,  must  be  first 
deducted,  together  with  the  taxes,,  insurance,  and  repairs 
necessary  to  keep  the  improvement  permanently  go  o  d 
The  surplus  it  will  yield  after  making  these  deductions, 
determines  the  true  value  of  the  lot. 

There  are  two  kinds  of  value :  actual  value,  and  legal 
value.  Actual  value  belongs  to  anything  that  inhe- 
rently possesses  the  means  of  affording  food,  or  which 
can  be  employed  for  clothing,  shelter,  or  some  other  use- 
ful purpose,  ornamental  or  otherwise,  without  being 
exchanged  for  any  other  thing. 

Legal  value  belongs  to  anything  which  represents 
actual  value,  or  capital.  Its  existence  depends  upon 
actual  value.  The  worth  of  things  of  legal  value  depends 
upon  their  capability  to  be  exchanged  for  things  of  actual 
value. 

The  following  illustration  shows  the  distinction  be- 
tween actual  and  legal  value,  and  the  dependence  of  the 
latter  upon  the  former.  The  national  debt  of  England 
exceeds  £800,000,000  sterling,  say  $4,000,000,000.  It 
bears  interest  at  about  an  average  of  three  per  cent,  per 
annum,  amounting  to  an  annual  sum  of  $120,000,000. 
A  hundred  and  twenty  millions  of  dollars'  worth  of  the 
products  of  labor,  of  actual  value,  must  be  sold  annually 
to  pay  the  interest ;  to  pay  the  principal  would  require  a 
large  proportion  of  the  wealth  of  the  country.  If  the 
paj»tr,  the  legal  value  which  represents  and  secures  the 
debt  and  interest,  were  collected  and  burned,  it  would 
not  diminish  the  real  wealth  of  the  nation.  It  would 
merely  cause  a  change  in  the  individual  ownership  of 
property.  But  alter  the  circumstances,  and  suppose  a 
similar  amount  of  actual  value  to  be  consumed,  houses, 
manufactories,*  machinery,  fences,  grain,  etc.,  to  the 
amount  of  $4,000,000,000,  and  nearly  every  improve- 
ment would  be  swept  from  the  British  Islands.  Destroy 
merely  the  three  per  cent,  interest  of  actual  value  on 


OF   VAUJE.  43 

the  debt  for  one  year — i.  e.,  products  to  the  amount  of 
$120,000,000,  and  a  famine  would  ensue ;  for  actual  value, 
the  products  of  labor,  would  be  destroyed,  instead  of  a 
legal  representative,  as  in  the  case  of  the  conflagration 
of  the  paper  securing  the  interest. 

The  power  of  money,  like  the  power  of  a  bond  and 
mortgage,  is  legal.  A  mortgage  upon  a  specific  piece  of 
land  gives  the  owner  of  this  paper  instrument  a  right  to 
a  certain  portion  of  the  value  of  the  land,  A  mortgage 
is  a  specific  lien,  by  which  one  individual  binds  a  certain 
portion  of  his  property  to  another.  A  lien  on  property, 
in  the  technical  acceptation,  is  a  judgment  recorded  on 
the  docket  of  a  court,  or  a  mortgage  recorded  in  the 
county  clerk's  office.  These  instruments  hold  a  right 
over  the  property  of  the  debtor,  in  defiance  of  him,  or  of 
any  other  person  who  may  have  the  property  in  posses- 
sion. Money  is  a  public  lien  upon  all  property  that  is 
for  sale  in  the  nation;  and  the  holder  of  money  can,  at 
all  times,  procure  with  it  the  amount  of  property  which 
it  represents,  as  much  as  the  holder  of  a  mortgage  can 
procure  the  specified  amount  of  property  upon  which  the 
mortgage  is  a  lien.  Money  is,  however,  a  lien  superior 
to  all  mortgages  and  judgments ;  because,  if  the  specified 
amount  of  money  be  tendered,  the  owner  of  the  mort- 
gage, or  judgment,  is  compelled  to  cancel  it. 

Notes  of  hand  are  deemed  by  all  business  men  to  be 
liens  upon  the  property  of  their  drawers  ;  otherwise, 
although  a  man  owned  ten  thousand  dollars'  worth  of 
property,  his  note  for  five  thousand  dollars  would  be 
deemed  no  better  secured  than  if  he  owned  no  property. 
If  money  were  not  a  lien  on  property,  it  would  be  value- 
less, and  people  would  cease  to  part  with  their  property 
for  it. 

The  value  of  notes  of  hand,  bonds  and  mortgages, 
book  accounts,  and  money,  depends  upon  their  capabi- 
lity of  being  exchanged  for  property.  Their  power  to 


44  OF   VALUE. 

accumulate  is  given  by  law,  and  they  accumulate  a  mere 
legal  representative ;  that  is,  interest  in  money,  which  is 
valuable  only  because,  like  the  principal,  it  can  be  ex- 
changed for  a  certain  amount  of  actual  value.  Hence, 
the  value  is  in  the  property,  and  not  in  the  money  or  in 
the  obligations.  Money,  and  all  obligations,  are  mere 
representatives,  and  depend  upon  property  for  their 
value. 


CHAPTER   II. 

MONEY-THE  MEDIUM  OF  DISTRIBUTION. 


SECTION  I. 

THE  NATURE   AND   PROPERTIES    OF   MONEY. 

MONET  is  the  national  medium  of  exchange  for  pro- 
perty and  products.  It  must  be  instituted,  and  its  value 
must  be  fixed  by  the  laws  of  the  nation,  in  order  to  make 
it  a  public  tender  in  payment  of  debts.  No  debt  can  be 
paid  with  property  or  with  individual  notes,  except  by 
consent  of  the  creditor ;  but  when  money  is  tendered, 
all  creditors  are  compelled  to  receive  it  in  full  satisfac- 
tion of  debts.  The  aim  of  legislation  in  regulating  the 
value  of  money  is  to  insure  to  all  individuals,  in  making 
exchanges  of  their  property  for  money,  the  full  value  of 
their  products  or  property.  Debts  are  postponements 
of  the  tune  of  payment  for  the  property  or  products 
received;  and  loans  of  money,  and  all  rents  of  property, 
are  mere  rents  of  the  use  of  certain  amounts  of  legal  or 
actual  value,  which  use  is  to  be  paid  for  at  the  expiration 
of  a  specified  period.  Money  is  the  legal  tender,  and 
must  be  offered  and  received  in  payment  for  all  these 
debts. 

Certain  properties  are  by  law  given  to  some  substance, 
which  beai-s  the  name  and  performs  the  functions  of 
money.  The  term  money,  then,  signifies  a  legal,  public 


46  THE   TOWER   OF  MONEY 

medium  of  exchange,  which  possesses  all  the  qualifications 
necessary  to  effect  a  just  exchange  of  property.  In  the 
discussion  of  the  nature  of  money,  it  will  appear  that  its 
properties  are,  in  truth,  the  creation  of  law,  and  entirely 
different  from  the  properties  of  the  things  which  it  ex- 
changes. 

Money  has  four  properties  or  powers,  viz. :  power  to 
mpv&wnt  valise,  poicer  to  measure  value,  power  to  accu- 
mulate value  by  interest,  and  power  to  exchange  value. 
These  properties  are  co-essential  to  a  medium  of  ex- 
'  change  :  it  is  impossible  that  any  one  of  them  should 
exist  in  such  a  medium  independently  of  the  others. 
The  material  of  money  is  a  legalized  agent,  employed  to 
express  these  powers,  and  render  them  available  in  trade. 
The  powers  of  money,  which  alone  render  it  useful,  are 
created  by  legislation ;  therefore,  money  can  possess  none 
but  legal  value.  As  all  legal  value  depends  upon  the 
actual  value  which  it  holds  or  represents,  money  must 
represent  actual  value — that  is,  the  value  of  property  or 
labor. 

SECTION  II. 

THE   POWER    OP   MONEY   TO    REPRESENT  VALUE. 

Money  must  be  a  legal  rejwesentative  of  property,  for 
it  is  impossible  to  find  any  light  and  portable  material 
possessing  the  requisite  inherent  value  to  equal  and 
balance  the  value  of  the  property  and  products  to  be 
exchanged.  The  real  value  is  in  the  property  and  pro- 
ducts, and  the  money  is  only  the  legal  medium  by  which 
this  value  is  represented  and  by  which  exchanges  of  the 
property  and  products  are  made. 

Every  representative  is  distinct  from  the  thing  which 
it  represents ;  and  its  presence  implies  the  absence  of  the 
thing  represented.  A  representative  has  power  to  act 
for,  or  in  lieu  of  something  else.  The  power  to  represent 


TO   REPRESENT   VALUE.  47 

is  always  independent  of  the  natural  or  inherent  powers 
of  the  representative ;  it  is  superadded  and  delegated, 
and  cannot  alter  the  original  capabilities  and  qualities  of 
the  agent.  Delegated  authority  gives  the  agent,  the 
person  or  thing,  power  over  other  persons  or  things, 
which,  with  merely  his  natural  capabilities,  he  cannot 
possess.  Acting  for  himself  alone,  his  acts  are  all  indi- 
vidual, and  incapable  of  binding  any  but  himself.  For 
instance,  he  cannot  give  a  note,  bond  or  deed,  which  will 
bind  others,  or  the  property  of  others,  unless  the  power 
be  expressly  delegated  to  him.  He  may  receive  authority 
to  give  a  note  or  bond  binding  the  property  of  the  peo- 
ple for  its  payment.  This  authority  does  not  diminish 
or  alter  his  capabilities  as  an  individual ;  it  is  superadded 
to  his  natural  endowments.  An  ambassador  represents 
our  nation  at  a  foreign  court.  If  he  be  lost  at  sea,  the 
nation  loses  but  one  individual,  although  he  represents 
and  acts  for  thirty  millions.  But  if  the  nation  should 
be  annihilated,  and  the  ambassador  should  reach  his  des- 
tination in  safety,  he  would  cease  to  be  a  representative : 
he  would  have  nothing  to  represent.  He  would,  how- 
ever, possess  all  his  powers  as  an  individual — he  would 
lose  only  his  delegated  authority  as  a  representative. 

A  representative  in  Congress  is  chosen  by  the  people, 
and  is  empowered  to  act  for  or  in  lieu  of  them.  Still  it 
is  not  supposable  that  he  possesses  as  much  knowledge 
and  skill  as  all  his  constituents.  They  are  farmers, 
mechanics,  manufacturers,  and  merchants.  Of  many  of 
the  arts  with  which  they  are  familiar,  the  member  of 
Congress  is  ignorant.  He  is  their  representative  for  one 
specific  purpose — i.  e.y  to  make  laws  to  govern  the  peo- 
ple. He  has  a  moral  perception  of  justice  corresponding 
to  their  perceptions  of  justice,  and  this  fits  him  to  be 
their  representative  in  making  laws.  Money  is  made 
solely  to  facilitate  the  exchange  of  products.  To  be 
capable  of  effecting  this  exchange,  it  must  be  endowed 


4:8  THE   POWEK   OF   MONET 

with  a  legal  power  to  represent  actual  value ;  for  it  pos- 
sesses no  inherent  quality  which  makes  it  equivalent  to 
products  or  labor  more  than  the  representative  in  Con- 
gress possesses  all  the  knowledge  and  abilities  of  his  con- 
stituents. It  is  held  for  the  time  being  in  lieu  of  property ; 
we  cannot  use  it  as  property,  and  if  we  wish  to  use  actual 
property  we  must  obtain  it  by  giving  the  legal  representa- 
tive, money,  in  exchange  for  it.  A  representative  in 
Congress  has  the  sole  authority  to  act  there ;  and  the 
people  whom  he  represents  can  neither  control  him,  nor 
be  heard  in  lieu  of  him.  They  have  no  authority  nor 
voice  in  making  the  laws  except  through  their  repre- 
sentative ;  but  the  laws  which  he  helps  to  enact  have  a 
binding  force  on  his  constituents  and  others.  So  of 
money ;  when  it  is  made  a  representative  of  value  it  con- 
trols and  determines  the  value  of  labor  and  property, 
while  these  have  no  power  to  control  and  regulate  the 
value  of  the  money.  The  money  is  the  only  legal  tender 
for  debts ;  and  all  property  and  labor  are  as  powerless  to 
discharge  an  obligation  as  the  constituents  of  a  repre- 
sentative are  to  act  in  Congress  after  they  have  delegated 
their  power  to  their  member.  The  representative  of 
value  should  no  moi-e  have  power  to  accumulate  pro- 
perty in  the  hands  of  a  few  than  the  representative  of  the 
people  should  be  allowed  to  legislate  for  the  benefit  of  a 
few  of  his  constituents.  Both  are  mere  representatives, 
endowed  with  powers  for  specific  purposes ;  the  former 
to  exchange  products,  the  latter  to  enact  laws.  The 
producing  classes  elect  and  support  the  members  of 
Congress,  who  are  bound  to  make  laws  for  the  equal 
benefit  of  the  people.  The  people  also  furnish  the 
material  of  money  and  the  property  which  it  represents ; 
and  the  representative  of  value  should  be  such  as  to  con- 
duce in  the  highest  degree  to  their  welfare. 

The  following  is  another  example  of  delegated  or  re- 
presentative power  :  A  man  gives  a  note  for  a  thousand 


TO   REPRESENT   VALUE.  49 

dollars.  He  thus  delegates  to  the  paper  on  which  the 
note  is  drawn  a  power  that  increases  its  legal  value  mil- 
lions of  times.  Before  the  drawing  of  the  note,  the 
paper  possessed  a  small  amount  of  actual  value,  but  was 
not  a  legal  representative  of  other  property;  for,  as 
paper  only,  its  worth  depended  upon  its  inherent  qual- 
ities. But  when  the  note  is  drawn,  the  paper  becomes 
a  representative,  and  has,  according  to  law,  a  delegated 
control  of  a  thousand  dollars'  worth  of  the  property  of 
the  drawer.  The«  drawing  of  the  note  does  not  add  a 
fraction  to  the  actual  worth  of  the  paper ;  its  value  in 
holding  the  property  is  legal,  and  superadded  to  its  in- 
herent qualities ;  the  same  value  might  be  superadded 
by  law  to  a  plate  of  steel,  or  of  any  metal.  The  note 
and  the  property  are  distinct  existences  ;  but  the  legal 
value  of  the  note  depends  on  the  actual  value  of  the 
property.  The  paper  material  of  a  note  good  for  a 
thousand  dollars,  is  not  as  valuable  as  au  ounce  of  flour ; 
but  it  has  a  legal  power  which  makes  it  capable  of  being 
exchanged  for  two  hundred  barrels  of  flour,  worth  five 
dollars  each.  A  trifling  labor  will  provide  the  repre- 
sentative note,  but  a  great  amount  of  labor  is  required 
to  produce  such  a  quantity  of  flour,  or  actual  wealth. 
All  individual  notes  are,  however,  payable  not  in  flour, 
nor  in  actual  products  or  property,  but  in  money,  the 
legal  representative  of  all  commodities  and  property. 

According  to  law,  the  owner  of  an  estate  represents 
the  value  of  the  estate  in  his  own  person ;  but  by  a 
simple  power  of  attorney,  he  can  give  to  another  the 
entire  control  of  his  property  during  his  life-time.  The 
receiver  of  the  power  may  not  be  worth  a  dollar,  but 
the  power  of  attorney  may  make  him  the  representative 
and  controller  of  millions  of  dollars'  worth  of  property. 
The  paper*  that  secures  to.  him  the  control  .of  the  pro- 
perty has  no  greater  inherent  value  after  the  writing 
of  the  instrument,  than  it  had  before  ;  it  is  merely  made 
3 


50  THE   POWER   OF   MONEY 

to  represent  the  property  and  control  its  use.^  The 
actual  value  which  the  paper  represents,  exists  in  the 
property,  and,  without  the  property,  the  paper  would  be 
worthless.  The  power  of  attorney  is  confined  to  an 
individual ;  but  if  a  man,  instead  of  making  the  power 
to  a  single  person,  should  make  it  to  bearer,  whoever 
held  the  paper  would  have  power  over  the  property  con- 
trolled by  it.  The  negotiable  power  of  money  is  in- 
separable from  it,  otherwise  it  would  not  be  money. 
The  holder  of  money  has  power  over^i  certain  amount 
of  property  for  sale,  and  can  appropriate  it  to  himself. 
Money  has  a  legal  power  or  value  as  much  superior  to 
the  natural  value  of  its  material,  as  a  paper  which 
secures  authority  over  property  has  a  value  superior  to 
blank  paper. 

Money  is,  then,  a  legal  existence,  being  constituted  a 
national  representative  of  property ;  consequently  it  is  a 
public  lien  on  all  property  for  sale  in  the  nation,  a  public 
medium  for  the  exchange  of  products,  and  a  tender  in 
payment  of  debts.  If  money  be  made  a  representative 
of  the  earth  and  its  productions,  it  cannot  fail  to  be 
permanently  valuable,  for  the  earth  and  its  products  are 
necessary  to  the  existence  of  man  ;  and  anything  which 
legally  represents  them,  and  can  be  exchanged  for  them, 
must  be  valuable  to  its  holders. 

It  is  a  popular  error  that  the  value  of  money  depends 
upon  the  material  of  which  it  is  made.  As  this  miscon- 
ception of  the  nature  of  money  is  of  long  standing,  we 
shall  endeavor  to  point  out  its  inconsistency,  in  connec- 
tion with  each  property  of  money.  The  value  of  money 
perpetually  depends  upon  its  power  to  represent  value, 
and  not  upon  its  material,  because  money  never  reaches 
a  point  at  which  it  can  be  used  as  an  article  of  actual 
value.  Suppose  twenty-six  individuals  owe  $100  each, 
payable  on  the  same  day  :  A.  owes  B.,  B.  owes  C.,  and 
so  on  through  the  alphabet  to  Z.  In  the  morning,  A. 


TO   BEPKESENT   VALUE.  51 

borrows  from  a  bank  a  bank-note  for  $100  and  pays  it  to 
B.,  B.  pays  it  to  C.,  C.  to  D.,  and  so  on,  until  it  passes 
down  to  Z.,  who  owes  and  pays  it  to  the  bank  from 
which  A.  borrowed  it.  The  same  bank-bill  pays  twenty- 
six  debts,  and  in  the  evening  is  in  the  ownership,  and 
possession  of  the  same  bank  as  in  the  morning.  Suppose 
that,  instead  of  money,  each  of  the  twenty-six  persons 
owes  in  the  same  order  a  loaf  of  bread,  and  each  must 
have  the  loaf  to  use  on  the  specified  day  or  suffer  from 
hunger.  In  the  morning  A.  goes  to  a  baker,  borrows  a 
loaf  and  pays  it  to  B.,  B.  pays  it  to  C.,  C.  to  D.,  and  so 
on  through  the  alphabet  to  Z.,  who  pays  it  over  to  the 
baker.  The  money  in  passing  through  this  routine  an- 
swers every  man's  purpose,  and  in  meeting  the  contract 
fulfils  the  function  for  which  money  is  designed,  but  the 
bread  does  not  fulfil  the  purpose  for  which  bread  is  de- 
signed, nor  can  a  single  loaf  short  of  twenty-six  answer 
the  purpose.  But  one  bank-note  pays  the  twenty-six 
debts,  and  is  ready  to  fulfil  as  many  contracts  more  the 
next  day,  whereas  twenty-six  new  loaves  would  be  re- 
quired to  meet  an  equal  number  of  contracts.  It  may  be 
objected  that  the  comparison  is  not  a  fair  one,  because 
bread  is  consumed  by  use  and  money  is  not :  take  then 
any  other  article  valuable  for  its  material  and  not  con- 
sumed in  the  use.  Twenty-six  individuals  have  land  to 
plough  on  the  same  day;  can  they  borrow  one  plough 
and  make  it  answer  the  purpose  of  twenty-six  ? 

The  value  of  lands  and  of  goods,  wares  and  merchan- 
dise, does  not  depend  upon  any  act  of  legislation,  upon  any 
power  to  represent  and  exchange,  but  upon  their  utility 
for  food,  clothing,  etc.  If  the  gold  or  silver  material  of 
money  be  used  for  any  other  purposes  than  to  represent 
and  exchange  property,  if  it  be  used  for  spoons,  or 
ornaments,  it  at  once  ceases  to  be  money :  it  is  no  longer 
a  legal  representative  of  value,  but  finds  its  level  as  a 
commodity.  But  the  inherent  properties  of  all  articles 


52  THE   POWEK   OF   MONET 

of  actual  value,  are  their  only  valuable  properties.  How- 
ever various  the  employment  of  articles  of  actual  value, 
their  properties  do  not  change,  or  become  useless.  For 
example,  cloth  is  useful  to  make  a  garment,  and  when 
made,  is  a  cloth  garment.  The  nature  of  the  cloth  does 
not  change;  it  is  only  applied  to  a  specific  purpose,  and 
the  cloth  retains  its  properties  of  durability,  etc. 
Metal  buttons  are  used  upon  the  garment,  and  continue  to 
be  metal  buttons.  But  silver  money  converted  into  a 
spoon,  makes  a  silver  spoon,  and  not  a  money  spoon. 
The  silver  is  no  longer  a  legal  representative  of  actual 
value ;  it  is  no  longer  money,  for  it  has  ceased  to  have 
the  properties  of  money,  which  are  creations  of  law. 
Neither  a  spoon  nor  bullion  can  legally  represent, 
measure,  accumulate  nor  exchange  property;  and  the 
mere  metal  is,  consequently,  not  a  medium  of  exchange, 
nor  a  tender  in  payment  of  debts.  The  sole  value  of 
gold  and  silver  coins,  when  not  used  for  a  currency,  con- 
sists in  the  worth  of  their  materials  for  spoons,  ornaments, 
etc.,  which  are  a  very  small  part  of  our  actual  wealth, 
and  not  indispensable  to  human  existence.  The  metals 
cease  to  be  money,  as  the  power  of  a  representative 
ceases  when  the  term  for  which  he  was  elected  expires. 
He  may  be  reflected  and  receive  his  former  power ;  and 
the  gold  may  be  recoined  by  the  government,  and  thus 
be  endowed  with  its  former  power  as  money.  So,  if  the 
paper  of  a  bond  or  note  be  ground  to  dust  its  value 
ceases ;  but  it  may  be  remade  into  paper,  and  by  the 
requisite  writings  receive  its  former  value. 

The  laws  of  nations  have  established  money  as  the 
standard  of  value.  These  laws  are  immaterial ;  they  are 
principles,  and  not  material  substances.  The  power  of 
money  is  also  immaterial :  it  is  its  legal  authority,  and 
not  its  material  substance  that  establishes  its  value  and 
power.  The  laws  have  professedly  established  the  value 
of  money  in  its  material  substance,  but  the  groundwork 


TO   KEPRESENT   VALUE.  53 

being  false,  they  have  failed  practically  to  establish 
money  upon  this  basis ;  yet  they  have  so  far  succeeded 
as  grossly  to  deceive  the  public.  That  the  worth  of 
money  to  exchange  property  does  not  reside  in  its 
material,  but  in  its  legal  power  to  represent  value,  will 
appear  in  the  following  illustrations :  A.  hires  B.  and  C. 
to  work  for  him  at  ten  dollars  per  week  each.  At  the- 
end  of  the  week  he  pays  B.  a  ten-dollar  gold  piece,  and 
C.  a  ten-dollar  bank-note ;  taking  in  both  cases  a  receipt 
in  full  for  the  week's  work.  B.  is  now  the  actual  owner 
of  the  gold,  and  C.  the  actual  owner  of  the  paper  in  the 
bank-note.  C.  can  buy  in  the  market  just  as  many  of  the 
necessaries  of  life  with  his  paper  money  as  B.  can  buy 
with  his  piece  of  gold.  B.  gave  no  more  labor  for  the 
gold  money  than  C.  gave  for  the  paper  money,  and  can 
buy  no  more  products  with  the  gold  than  C.  can  buy 
with  the  paper.  If  there  be  any  intrinsic  value  in  gold 
money  which  does  not  exist  in  paper  money,  B.,  when 
he  parts  with  his  piece  of  gold,  loses  all  the  difference 
between  the  intrinsic  value  of  the  gold  money  and  the 
intrinsic  value  of  the  paper  money.  But  all  the  difference 
in  the  intrinsic  value  of  the  gold  and  paper  disappears 
when  both  are  used  as  money ;  hence  it  is  evident  that 
it  is  the  immaterial  power,  that  it  is  its  legal  authority 
over  other  things,  and  not  the  intrinsic  value  of  its  sub- 
stance, that  establishes  the  market  value  of  the  money. 
B.  did  not  work  the  week  because  he  needed  the  gold, 
neither  did  C.  work  the  week  because  he  needed  the 
paper.  They  both  labored  for  the  same  object,  which 
was  to  procure  the  necessaries  of  life;  and  they  both 
knew  that  either  kind  of  money  was  legally  competent 
to  pay  for  these  things.  A  yard  of  cloth  measured  with 
a  gold  yard-stick  is  neither  longer  nor  shorter  than  if 
measured  with  a  wooden  one ;  and  property  purchased 
with  gold  or  silver  money  is  neither  more  nor  less 
valuable  than  if  bought  with  paper  money.  A  person 


54  THE   POWEK   OF   MONEY 

intends  to  purchase  a  farm  and  settle  in  Ohio.  He  has  a 
thousand  dollars  in  silver,  but,  as  it  is  inconvenient  to 
transport  the  specie,  he  exchanges  it  at  a  bank  in  New 
York  for  a  thousand  one-dollar  bank  bills.  The  bills 
readily  purchase  the  farm.  The  individual  who  receives 
them  in  payment  lends  them  on  interest,  and  the  bor- 
rower purchases  wheat  with  them.  Thus  the  bills  circu- 
late as  money,  and  can  be  loaned  for  as  good  an  income, 
or  will  purchase  as  much  grain,  as  a  thousand  dollars  in 
silver.  They  fulfil  every  purpose  for  which  money  is 
designed  as  well  as  the  silver  would.  If  the  notes  should 
remain  permanently  in  Ohio,  and  the  people  should  believe 
the  bank  secure,  the  notes  would  be  a  much  better  cur- 
rency than  coins,  for  they  would  make  purchases  as  well, 
they  could  as  well  be  loaned  for  an  income,  and  could  be 
much  more  easily  transported.  "Why  could  not  a  thou- 
sand axes  be  deposited  in  Wall  street,  and  a  thousand 
pieces  of  paper  be  taken  for  them,  on  each  corner  of 
which  was  engraved  "  one  axe,"  and  in  the  body  a  written 
promise  to  pay  one  axe  on  demand,  and  these  paper  axes 
be  taken  to  Ohio,  and  made  to  answer  every  purpose  for 
which  axes  are  designed,  in  clearing  forests,  etc.,  in  lieu 
of  the  steel  axes  ?  There  is  as  much  resemblance  between 
a  paper  axe  and  a  steel  axe  as  there  is  between  a  paper 
dollar  and  a  silver  dollar.  If  a  paper  dollar,  that  repre- 
sents a  silver  dollar,  is  as  good  for  all  the  purposes  for 
which  money  is  designed  as  a  silver  dollar,  why  is  not  a 
paper  axe,  that  represents  a  steel  axe,  as  good  for  all 
the  purposes  for  which  axes  are  designed  as  the  steel 
axe  ?  The  reason  that  the  paper  dollar  will  answer  as 
well  as  the  silver  dollar  is,  that  the  silver  and  the  paper 
dollar  are  both  representatives,  the  silver  dollar  equally 
with  the  paper  dollar.  (See  Chap.  III.,  The  Banking 
System.}  If  the  value  of  money  be  in  the  worth  and 
weight  of  its  material,  it  cannot  be  representative ;  and 
if  its  value  be  not  representative,  it  would  be  as  impos- 


TO   REPRESENT   VALUE.  55 

sible  to  make  paper  money  fulfil,  as  it  now  does,  the 
functions  of  coins  as  to  make  a  paper  promise  to  pay  a 
loaf  of  bread  on  demand  as  nutritious  as  the  bread ;  or  to 
make  paper  representatives  of  ploughs  promising  to  pay 
real  ploughs  on  demand  capable  of  tilling  the  ground. 
If  a  city  bank  have  $100  in  coins  and  issue  $000  in  bank- 
notes, the  amount  of  money  is  as  much  increased  as  if 
$600  in  specie  had  been  issued.  Each  dollar  of  the  bank- 
notes will  pay  for  as  much  labor  and  for  as  many  of  the 
necessaries  of  life  as  any  one  dollar  in  specie ;  and  so  long 
as  these  bank-notes  continue  to  circulate  and  to  be  on  a 
par  with  specie,  they  continue  to  hold  the  same  power 
and  value  in  the  market  that  are  held  by  gold  and  silver 
money.  Hence,  if  the  value  of  money  is  inherent,  this 
must  prove  that  it  inheres  in  bank-notes  as  well  as  in 
coins.  The  fact  that  it  takes  many  thousand  times  more 
labor  to  mine  the  gold  and  silver  and  coin  them  into 
money,  than  it  does  to  make  the  paper  and  engrave  the 
bank-notes,  makes  no  difference  in  the  market  value  of 
the  money,  because  the  value  of  the  money  depends  on 
its  immaterial  power — that  is,  upon  its  legal  authority, 
and  not  at  all  upon  its  material  substance.  The  law  can 
and  does  designate  the  substance  out  of  which  money 
shall  be  made,  but  human  laws  do  not  in  the  least  alter 
the  intrinsic  value  of  any  substance.  We  might  as  well 
undertake  by  legislation  to  make  saw-dust  as  nutritious 
as  bread,  as  to  undertake  to  make  paper  money  on  a  par 
with  specie  if  the  value  of  the  specie  were  dependent  on 
i  3  material  substance.  It  takes  as  much  labor  and 
material  to  make  a  one-dollar  bank-bill  as  it  does  to  make 
a  one  thousand  dollar  bill;  yet  the  latter  is  worth  in 
the  market  precisely  one  thousand  times  more  than  the 
former. 

The  reason  that  the  value  of  bullion  is  equal  to  that  of 
coins  is,  that  coins  are  made  at  the  expense  of  the  nation. 
The  government  coins  all  the  gold  and  silver  offered  at 


56  THE   POWER    OF   MONET 

the  mint  free  of  charge.  It  will  give,  in  exchange  for 
them,  an  equal  weight  in  coins.  If  the  government 
would  take  wool,  and  make  cloth  at  the  public  expense,  and 
return  to  those  who  furnish  wool  an  equal  weight  in  cloth, 
the  cloth  and  wool  would  command  the  same  price, 
because  the  expense  of  manufacturing  the  cloth  would 
be  borne  by  the  government.  If  a  charge  were  made 
for  manufacturing,  the  wool  would  be  worth  less  than 
the  cloth  ;  and  if  a  premium  were  charged  for  coinage, 
the  value  of  bullion  would  depreciate  below  that  of  coins. 
It  is  clear  that  gold  and  silver  have  no  special  inherent 
value  which  makes  them  naturally  money ;  for  they  are 
not  money  until  made  so  by  conversion  into  coin. 


SECTION  III. 

THE   POWER  OF  MONEY  TO  MEASURE  VALUE. 

The  power  to  measure  value  is  another  property  of 
money.  Measures  are  definite  quantities  of  length, 
weight,  bulk,  and  value,  by  which  the  amount  of  length, 
weight,  bulk,  and  value  in  any  substance  is  defined  and 
ascertained. 

Length,  weight,  bulk,  and  value,  must  necessarily  be 
indefinite,  unless  some  limit  be  fixed  upon  for  a  standard 
to  which  all  other  lengths,  weights,  quantities,  and  values 
may  be  referred,  and  by  which  they  may  be  computed. 
Length  may  be  the  circumference  of  the  earth,  or  the 
unknown  distance  to  a  star,  or  it  may  be  the  one-thou- 
sandth part  of  an  inch ;  therefore,  to  convey  any  definite 
idea  of  length,  reference  must  be  made  to  a  fixed 
standard.  Weight,  quantity,  and  value,  are  equally 
indefinite ;  hence  the  necessity  for  some  limit  or  standard, 
to  which  they  may  be  referred,  and  by  which  their 
amount  may  be  ascertained. 


TO   MEASURE    VALUE.  57 

The  length,  weight,  quantity,  and  value  of  all  articles, 
in  business  transactions,  are  settled  by  certain  measures 
fixed  upon  by  the  government.  The  length  of  the  yard- 
stick measures  and  determines  a  before  undefined  length 
of  cloth ;  the  size  of  the  bushel  measures  and  defines  the 
before  undefined  quantity  of  grain  ;  and  so  of  the  pound 
weight,  it  defines  the  quantity  of  cotton  or  other  sub- 
stances. The  cloth  does  not  define  the  length  of  the 
yard-stick,  neither  does  the  grain  determine  the  size  of  the 
bushel,  nor  the  cotton  the  pound  weight.  The  value  of 
the  dollar  measures  and  determines  a  before  undefined 
value  of  land,  labor,  or  products ;  the  value  of  land, 
labor,  and  products,  does  not  measure  and  determine 
the  already  defined  value  of  the  dollar.  When  the  yard- 
stick measures  cloth,  it  does  not  determine  its  own  length ; 
and  when  money  exchanges  property,  it  does  not  deter- 
mine its  own  value.  Both  the  length  of  the  yard-stick, 
and  the  value  of  the  money,  were  previously  determined 
by  the  laws  which  instituted  them,  and  gave  them  power 
to  measure  length  and  value,  which  are  their  sole  objects 
and  uses  as  measures. 

The  pound  weight,  or  the  standard  of  weights,  deter- 
mines the  amount  of  the  weight  of  all  commodities ;  and 
the  dollar,  or  money,  the  standard  of  value,  by  its  own 
fixed  legal  value,  determines  the  amount  of  the  value  of 
all  other  things.  The  weight  of  the  pound,  the  length 
of  the  yard,  and  the  value  of  the  dollar,  are  presumed 
to  be  invariably  fixed  by  national  laws,  and,  therefore, 
every  variation  from  their  legal  standard  is  a  fraud  upon 
the  public.  If  the  yard  be  variable,  the  measure  of 
length  will  commit  frauds  when  it  is  used  ;  and  if  its 
value  be  fluctuating,  the  measure  of  value  will  commit 
frauds  whenever  it  is  used  to  measure  the  value  of  labor 
or  property.  If  measures  be  strictly  just  and  uniform, 
they  will  equitably  determine  quantities  and  values, 
whether  of  land,  labor,  or  commodities. 
3* 


58  THE   POWER   OF  MONEY 

It  appears  that  the  government  considers  the  dollar  of 
more  importance  than  any  other  measure,  for  it  reserves 
the  right  to  coin  it,  and  makes  it  a  criminal  offence  for 
individuals  to  coin  or  issue  monty,  even  if  it  be  equal  to 
the  government  standard  in  purity  and  weight.  Indivi- 
duals are  also  prohibited  from  making  and  issuing  paper 
money  as  a  substitute  for  gold  and  silver  money,  unless 
especially  authorized  by  law  ;  and  when  this  privilege  is 
granted,  the  amount  that  may  circulate  and  the  security 
that  shall  be  given  to  secure  the  public  against  loss,  are 
also  prescribed  by  law.  But  any  individual  may  make 
and  use  any  other  measures,  or  may  make  and  sell  them 
in  market,  the  government  having  merely  a  supervision 
over  them  as  to  weight,  size  and  length.* 

Money  measures  its  own  amount  or  value  of  actual 
property  as  often  as  it  passes  from  one  individual  to 
another,  as  the  yard-stick  measures  its  own  length  as 
often  as  it  passes  over  the  cloth  ;  consequently  a  given 
sum  of  money  measures  in  a  given  time  more  or  less  pro- 
perty, according  to  the  frequency  of  its  transfer.  In 
one  morning,  a  dollar,  passing  through  several  hands, 
may  be  laid  out  for  food,  buy  various  articles  of  clothing, 
be  loaned  out  with  other  dollars  on  bond  and  mortgage, 
and  then  purchase  a  dozen  articles  more.  Every  time  it 
passes,  it  determines  the  market  value  of  the  thing  that 
it  buys. 

If  there  were  no  distinction  between  measures  of  value 
and  articles  of  value,  the  same  principle  would  apply  to 
both  ;  one  yard  of  cloth,  rapidly  measured,  would  answer 
the  purpose  of  two,  slowly  measured ;  a  pound  of  food, 
rapidly  weighed,  would  answer  the  purpose  of  two,  slowly 

*  Notwithstanding  the  care  the  government  has  taken  to  guard 
the  use  of  money,  there  is  in  this  nation  more  litigation,  fraud  and 
oppression,  growing  out  of  the  corrupt  use  of  money,  in  one  week, 
and  often,  doubtless,  in  a  single  day,  than  all  the  evils  that  occur  in  a 
century  from  the  fraudulent  use  of  all  other  measures. 


TO   MEASURE   VALUE.  59 

weighed.  The  value  of  money  cannot  consist  in  the 
amount  or  kind  of  the  metal  in  which  its  properties  are 
embodied  ;  for,  in  its  rapid  circulation,  it  can  be  used 
neither  as  a  utensil  nor  as  an  ornament,  and  is  only  useful 
to  exchange  property.  Eagles  and  dollars  are  seldom 
used  for  ornamental  purposes :  and  when  they  are  so 
employed  they  cease  to  exchange  products. 

The  value  of  money  balances  the  value  of  the  commo- 
dity sold,  as  the  weight  of  the  pound  balances  the  weight 
of  the  thing  weighed ;  or  the  yard,  the  length  of  the  cloth 
measured.  Measures  of  quantity  remain  stationary,  their 
only  function  being  to  determine  the  exact  quantities  of 
the  commodities  transferred  from  the  seller  to  the  pur- 
chaser. But  the  measure  of  value  passes  into  the  posses- 
sion of  the  seller,  who  holds  it  as  a  representative  of 
value  in  lieu  of  his  commodity.  And  it  is  on  this  account 
that  the  measure  of  value  is  frequently  confounded  with 
articles  of  value. 

Money,  like  all  other  measures,  is  divisible.  The  yard 
is  divided  into  feet  and  inches,  that  it  may  determine  any 
required  length.  The  pound  weight  is  divided  into  half- 
pounds  and  ounces ;  the  bushel  into  the  peck,  quart,  etc., 
that  they  may  accurately  determine  the  various  weights 
and  quantities  of  various  substances.  Money  is  divided 
into  pounds,  shillings,  and  pence,  dollars,  half-dollars, 
dimes,  etc.,  that  it  may  determine  the  precise  amount  of 
the  value  of  all  commodities. 

The  government  reserves  the  right  to  fix  the  length 
of  the  yard,  the  weight  of  the  pound,  the  size  of  the 
bushel,  and  the  value  of  the  dollar,  that  they  may  be  fit- 
ted for  public  use.  Money  is  the  public  measure  of  value ; 
and  the  government  is  bound  to  make  it  just  and  uniform, 
that  it  may  correctly  determine  the  value  of  all  commo- 
dities. 


60  THE    POWER   OF   MONEY 


SECTION  IV. 

THE   POWEE   OF   MONET   TO   ACCUMULATE   VALUE   BY 
INTEREST. 

Money,  the  representative  and  measure  of  value,  has 
also  the  power  to  accumulate  value  by  interest.  This  accu- 
mulative power  is  essential  to  the  existence  of  money, 
for  no  one  will  exchange  productive  property  for  money 
that  does  not  represent  production.  The  law  making 
gold  and  silver  coins  a  public  tender,  imparts  to  dead 
masses  of  metal,  as  it  were,  life  and  energy.  It  gives 
them  certain  powers  which,  without  legal  enactment, 
they  could  not  possess,  and  which  enable  their  owner  to 
obtain  for  their  use  what  other  men  must  earn  by  their 
labor.  One  piece  of  gold  receives  a  legal  capability  to 
earn  for  its  owner,  in  a  given  time,  another  piece  of  gold 
as  large  as  itself.  Or,  in  other  words,  the  legal  power 
of  money  to  accumulate  by  interest  compels  the  bor- 
rower, in  a  given  period,  determined  by  the  rate  of  in- 
terest, to  mine  and  coin,  or  procure,  by  the  sale  of  his 
labor  or  products,  another  lump  of  gold  as  large  as  the 
first,  and  give  it,  together  with  the  first,  to  the  lender. 
If  the  borrower  of  the  gold  pay  interest  half  yearly  at 
the  rate  of  seven  per  cent,  per  annum,  he  must  double 
the  lump  in  about  ten  years.  If  he  pay  interest  half 
yearly  at  the  rate  of  six  per  cent,  per  annum,  he  must 
double  the  lump  in  less  than  twelve  years ;  at  three  per 
cent.,  in  less  than  twenty-four  years ;  and  at  one  per 
per  cent.,  in  about  seventy  years. 

In  popular  phrase,  money  is  said  to  be  a  producer  of 
value;  but  this  expression  conveys  a  false  idea,  for 
money  possesses  no  power  to  produce.  The  earth  pro- 
duces by  actual  increase — by  the  growth  of  additional 
quantities  of  the  seed  sown.  But  money  possesses  no 


TO   ACCUMULATE   VALUE   BY   INTEREST.  61 

natural  capability  to  produce  its  like.  It  can  only  accu- 
mulate things  already  produced.  When  a  loan  of  a  hun- 
dred dollars  is  repaid  with  interest,  the  six  or  seven 
dollars  given  as  interest  have  not  grown  upon  the  ori- 
ginal one  hundred.  Nothing  grows  upon  the  mortgage 
that  bears  interest.  The  interest  on  the  money,  or  on 
the  mortgage,  must  be  paid  in  money  received  in  ex- 
change for  property,  products,  or  labor. 

The  worth  and  amount  of  the  interest  on  the  dollar 
constitute  and  determine  the  value  of  the  dollar,  and 
make  it  equal  to  a  certain  amount  of  actual  value  or  pro- 
perty, as  much  as  the  amount  and  kind  of  labor  that  a 
man  can  perform,  determine  his  value  as  a  workman ; 
or  as  the  quality  and  quantity  of  the  fruit  of  a  tree  deter- 
mine the  value  of  the  tree.  In  the  same  manner,  and  for 
the  same  reason,  if  the  interest  on  the  dollar  be  good, 
the  dollar  will  also  be  good.  The  value  of  the  workman 
and  of  the  tree  is  natural  to  them,  and  consists  in  their 
power  to  produce  ;  the  value  of  money  is  artificial,  and 
consists  in  its  arbitrary  power  to  represent  actual  value 
and  to  accumulate  by  interest. 

Demand  and  supply  are  sometimes  said  to  give  value 
to  money  ;  but  it  would  be  as  reasonable  to  assert  that 
demand  and  supply  fix  the  length  of  the  yard,  the  weight 
of  the  pound,  or  the  size  of  the  bushel,  as  that  demand 
and  supply  regulate  the  value  of  money.  One  is  a  legal 
instrument  to  determine  value,  its  own  value  being  fixed 
by  law  ;  the  others  are  legal  instruments  to  determine 
length,  weight,  and  quantity,  their  own  length,  weight, 
and  size  being  fixed  by  law. 

Money  is  valuable  in  proportion  to  its  power  to  ac- 
cumulate value  by  interest.  A  dollar  which  can  be 
loaned  for  twelve  per  cent,  interest,  is  worth  twice  as 
much  as  one  that  can  be  loaned  for  but  six  per  cent.,  just 
as  a  railroad  stock  which  will  annually  bring  in  twelve 
per  cent.,  is  worth  twice  as  much  as  one  that  annually 


62  THE   POWER   OF   MONEY 

brings  in  six  per  cent.  The  value  of  state,  bank,  rail- 
road, or  any  other  stock,  is  estimated  by  the  dividends 
it  will  pay  during  the  time  it  has  to  run.  Any  increase 
or  diminution  of  the  power  of  money  to  accumulate  by 
interest,  increases  or  diminishes  proportionably  its  value, 
and  consequently  its  power  over  property. 

Money  becomes  worthless  whenever  it  ceases  to  be 
capable  of  accumulating  an  income  which  can  be  ex- 
changed for  articles  of  actual  value.  Take  the  following 
example.  Suppose,  during  the  Revolutionary  war,  A.  had 
lent  to  B.  a  thousand  dollars  in  gold  or  silver  coin,  at  six 
per  cent,  interest,  for  a  term  of  fifty  years,  and  had  taken 
as  security  a  mortgage  on  B.'s  farm,  which  was  worth 
$10,000.  A.  had  agreed  to  receive'  the  six  per  cent, 
interest  from  B.  in  Continental  money.  This  currency 
soon  after  proved  to  be  worthless ;  and  the  interest 
proving  worthless,  the  principal  would  have  been  worth- 
less to  A.  during  the  fifty  years  for  which  he  lent  it,  al- 
though the  loan  was  made  in  gold  and  silver  coin,  and, 
at  the  expiration  of  that  period,  the  principal  would 
have  been  paid  him  in  coin. 

Now  reverse  the  circumstances,  and  suppose  A.  had 
lent  to  B.  a  thousand  dollars  in  Continental  money  on 
the  same  farm  for  fifty  years,  and  had  made  the  interest 
payable  in  gold  and  silver  coin.  Although  the  principal 
was  lent  in  Continental  money,  which  soon  after  became 
worthless,  it  would  have  continued  as  valuable  to  A.  for 
fifty  years,  as  the  interest  in  coin  which  he  received  upon 
it.  The  interest  continuing  valuable,  the  mortgage 
would  have  been  a  binding  lien  upon  B.'s  farm  for  the 
fifty  years,  and  would  have  taken  a  part  of  the  yearly 
produce  of  the  farm  for  that  period.  At  the  expiration 
of  the  fifty  years,  the  principal  would  have  become 
worthless,  for  it  could  not  have  brought  in  a  further  in- 
come. But  in  the  former  case,  in  which  specie  was  lent 
and  the  interest  made  payable  in  Continental  money,  the 


TO  ACCUMULATE   VALUE   BY   INTEREST.  63 

interest  being  worthless,  the  contract  would  not  have 
been  an  encumbrance  upon  B.'s  farm  ;  for  no  part  of  its 
yearly  products  would  have  been  required  to  pay  the 
interest.  At  the  expiration  of  fifty  years,  the  principal 
could  have  been  demanded  in  specie. 

The  value  of  money  as  much  depends  upon  its  legal 
power  to  be  loaned  for  an  income,  as  the  value  of  a  farm 
depends  upon  its  natural  power  to  produce.  If  the 
Continental  money,  or  the  assignats  of  France,  had  been 
made  representatives  of  property,  and  capable  of  being 
always  loaned  for  a  good  and  uniform  income,  they 
would  have  been  as  permanently  valuable  as  a  mortgage  in 
perpetuity  on  a  farm,  which  could  yearly  collect  from 
the  farmer  a  certain  quantity  of  products,  as  interest,  or 
income.  The  value  of  a  horse  depends  upon  his  ability 
to  perform  useful  labor  for  his  possessor ;  and  the  value 
of  money  depends  upon  its  capability  to  earn  for  its 
owner  by  being  loaned  on  interest.  Take  twenty  mort- 
gages for  ten  years  on  twenty  different  farms.  Suppose 
each  of  these  farms  to  rent  for  sixty  dollars  a  year,  just 
the  interest  on  each  of  the  mortgages.  It  would  take 
the  whole  produce  of  each  farm  to  pay  the  interest  on 
each  mortgage.  The  twenty  mortgages  would  take  the 
rent  or  produce  of  the  twenty  farms  for  ten  years.  In 
one  month,  one  thousand  dollars  could  be  easily  loaned 
so  as  to  take  the  entire  income  of  twenty  farms  for  ten 
years.  Consequently,  each  time  the  money  was  lent  it 
would  accumulate  an  income  which  would  be  as  valuable 
to  its  owner  as  a  farm  of  equal  value  leased  for  the  same 
period ;  for  the  income  on  the  money  would  yearly 
purchase  the  whole  yearly  produce  of  the  farm. 

The  difference  between  money  and  the  farms  is,  that 
the  former  is  a  legal  representative  and  measure  of  value, 
and  the  latter  are  of  actual  value.  The  money  is  as  capa- 
ble of  representing  and  measuring  its  own  amount  of 
value  a  hundred  times  in  a  year,  and  creating  a  hundred 


64:  THE   POWER   OF   MONET 

incomes,  as.  the  pound  weight  is  of  determining  its  own 
amount  of  weight  a  hundred  times.  The  quantity  of 
cloth  measured,  and  the  weight  of  things  weighed,  can- 
not be  increased  by  the  number  of  times  that  the  mea- 
sure is  applied  to  them.  But  money  being  a  representa- 
tive of  value,  and  being  endowed  by  law  with  the  power 
to  accumulate  by  interest,  makes  an  income  whenever  it 
is  transferred  from  one  to  another  as  a  loan. 

Anything  that  exists  in  perpetuity,  is  valuable  in  exact 
proportion  to  the  income  it  will  yearly  bring  to  its  owner. 
The  market  value  of  a  house,  store,  or  farm,  rises  or  falls 
with  the  rise  or  fall  of  its  yearly  rent ;  and  the  value  of 
the  dollar  rises  or  falls  with  the  rise  or  fall  of  its  rent  or 
interest.  If  we  admit  both  the  property  and  the  money 
to  be  merchandise,  this  principle  cannot  be  true  in  one 
case  without  being  equally  true  in  the  other ;  therefore, 
whether  we  assume  money  to  be  of  actual,  or  of  legal 
value,  to  keep  its  value  .uniform,  the  rate  of  interest  must 
be  kept  uniform.  Doubling  the  capability  of  the  dollar 
to  accumulate,  doubles  the  value  of  the  dollar.  Its 
nominal  value  may,  and  does  remain  the  same — that 
is,  it  retains  the  name  of  dollar,  although  it  possesses 
twice  its  ordinary  value,  or  power  over  property  and 
labor. 

The  same  principle  applies  to  all  measures.  The  length 
of  the  yard-stick  being  doubled,  although  it  might  still 
retain  its  name,  it  would  measure  twice  as  much  cloth  as 
with  its  present  limits.  And  money,  while  its  denomina- 
tions remain  the  same,  measures  more  or  less  property, 
according  to  the  rate  of  interest.  We  may  imagine  a 
measure  fluctuating,  expanding  and  contracting  between 
certain  points ;  as  a  yard-stick,  made  of  some  elastic 
material,  susceptible  of  being  stretched  to  twice  or  thrice 
its  ordinary  limits,  and  still  called  a  yard-stick,  and  used 
as  such.  But  no  one  would  deem  himself  acquainted 
with  the  actual  length  of  anything  measured  by  this 


TO   ACCUMULATE   VALUE   BY   INTEREST.  65 

yard-stick,  although,  if  it  were  the  legalized  one,  it  could, 
and  must  be  used  in  business.* 

Measures  of  quantity  are  instituted,  and  their  length, 
bulk,  and  weight  are  fixed  by  law,  and  not  by  individuals. 
The  measure  of  value  is  instituted  and  made  by  law ;  and, 
consequently,  it  is  fraudulently  used  when  the  rate  of  in- 
terest upon  it,  which  determines  its  value,  is  altered  by 
individuals.  The  fundamental  proposition  of  Jeremy 
Bentham,  in  his  "  Defence  of  Usury,"  is  as  follows  : 

"  No  man  of  ripe  years,  and  of  sound  judgment,  acting 
freely  and  with  his  eyes  open,  ought  to  be  hindered, 
with  a  view  to  his  advantage,  from  making  such  bargain, 
in  the  way  of  obtaining  money,  as  he  thinks  fit;  nor 
(what  is  a  necessary  consequence)  anybody  hindered 
from  supplying  him,  upon  any  terms  he  thinks  proper  to 
accede  to." 

According  to  Mr.  Bentham's  theory,  when  money  is 
loaned,  the  rate  of  interest  to  be  paid  must  be  a  matter 
of  agreement  between  borrower  and  lender.  This  makes 
the  rate  of  interest  belong  to  the  system  of  free-trade, 
whereas  it  no  more  belongs  to  this  system  than  the  length 
of  the  yard-stick  or  the  weight  of  the  pound.  By  in- 
creasing the  rate  of  interest,  both  the  principal  of  the 
money  and  the  interest  upon  it  have  an  increased  power 
over  property,  just  as  the  pound  increased  in  weight 
would  call  for  an  additional  quantity  of  products  to 
balance  it.  The  right  to  fix  the  value  of  money  is  as 
much  reserved  by  the  government  as  the  right  to  fix  the 
length  of  the  yard  or  the  weight  of  the  pound ;  and  the 
regulation  of  its  value?  is  a  thousand  times  more  impor- 
tant to  the  people,  f  The  value  of  money  is  no  more  fixed 

*  See  Appendix,  A. 

f  Although  the  value  of  money  is  now  professedly  fixed  by  the  go- 
vernment, we  can  form  no  correct  idea  of  what  its  value  will  be  at  the 
end  of  three  or  six  months.  But  we  should  think  it  ridiculous  to  ask 
what  would  be  the  length  of  the  yard,  or  the  weight  of  the  pound,  or 


66  THE   POWER   OF   MONEY 

or  regulated  by  the  laws  ordering  each  piece  of  money 
to  be  coined  of  a  certain  weight  and  kind  of  metal  than 
the  length  of  the  yard  would  be  fixed  by  ordering  it  to 
be  made  of  a  certain  weight  and  kind  of  wood,  without 
regard  to  its  length. 

The  value  of  money  depends  upon  its  power  to  accu- 
mulate value  for  its  owner,  by  interest,  and  not  upon  the 
worth  of  its  material ;  as  the  value  of  a  paper  instrument, 
which  secures  a  ground-rent,  depends  upon  the  produc- 
tiveness of  the  land  on  which  it  is  secured,  and  not  upon 
the  inherent  qualities  of  the  paper.  If  the  land  were  per- 
manently unproductive,  the  lien  could  command  no  pro- 
ducts, and  would  be  worthless,  except  so  far  as  the  paper 
on  which  it  was  drawn  possessed  inherent  value.  Sup- 
pose the  lien  to  be  engraven  on  a  silveir  plate,  instead  of 
on  paper,  and  to  be  made  in  perpetuity  for  $10,000,  at 
six  per  cent,  interest  per  annum.  Let  the  annual  pro- 
ducts of  the  land  be  sufficient  to  pay  for  the  labor 
expended  upon  it,  and  to  pay  the  ground-rent,  and  the 
silver  on  which  the  ground-rent  was  engraven  would  be 

the  size  of  the  bushel  three  or  six  months  hence ;  or  to  express  great 
anxiety  when  the  crops  were  coming  in  and  the  fall  trade  commencing 
whether  enough  measures  could  be  procured  to  measure  the  grain,  or 
scales  and  weights  to  weigh  it,  or  yard-sticks  to  measure  the  cloth 
manufactured.  We  should  think  fanners,  manufacturers  and  mer- 
chants crazed,  if  they  should  come  to  New  York  to  ascertain  whether 
enough  measures  could  probably  be  had  to  determine  the  weight  and 
quantity  of  their  products;  and  under  a  just  and  sound  monetary 
system,  it  would  be  equally  absurd  to  ask  whether  enough  money 
could  be  obtained  to  buy  or  exchange  the  goods,  or  to  make  any  in- 
ternal improvement;  and  it  would  appear  as  ridiculous  to  ask  what 
the  rate  of  interest  would  be  at  the  end  of  three  or  six  months  as  to 
ask  how  many  feet  it  would  then  take  to  make  a  yard.  Money  pro- 
perly instituted  would  be  as  definite  and  uniform  as  the  latter  measure, 
and  would  no  more  govern  the  amount  of  production  than  the  yard- 
stick does  the  quantity  of  cloth  manufactured.  It  could  be  about  as 
easily  procured  to  facilitate  all  desirable  production,  trade  and  im- 
provements as  yard-sticks  to  measure  any  quantity  of  cloth. 


TO   ACCUMULATE   VALUE    BY    IJSTTEKEST.  67 

worth  ten  thousand  dollars,  whether  the  plate  of  silver 
on  which  it  was  drawn  were  three  feet  square,  and 
weighed  three  hundred  pounds,  or  whether  it  were  three 
inches  square,  and  weighed  but  three  ounces.  If  the 
ground-rent  on  each  plate  were  in  perpetuity,  and  it  were 
necessary  to  preserve  each  in .  its  proper  form,  to  keep 
the  title  good,  although  so  great  a  diiference  existed  in 
the  weight,  there  would  be  no  difference  in  the  value  of 
the  two  plates,  for  both  would  secure  the  same  annual 
amount  of  interest.  If,  however,  the  ground-rent  should 
fail  because  of  some  defect  in  the  title,  of  course  the 
larger  plate  of  metal  would  be  worth  more  than  the 
smaller,  for  it  would  make  more  useful  and  ornamental 
articles.  A  ground-rent  made  in  perpetuity  for  $10,000, 
secured  on  good  property  by  paper  instruments,  would 
be  as  valuable  to  any  owner  as  the  larger  silver  plate. 
For  this  and  for  similar  purposes,  the  paper  is  as  much 
superior  to  the  silver  as,  in  manufacturing,  the  power- 
loom  is  superior  to  hand-weaving.  The  value  of  these 
liens  on  specific  pieces  of  land,  does  not  more  depend  on 
the  productiveness  of  the  land  than  the  value  of  money 
depends  upon  its  power  to  accumulate  an  income  from 
the  labor  or  property  of  borrowers.  The  value  of  the 
papers  which  secure  the  National  Debt  of  England  would 
cease  if  the  government  should  pass  a  laAv  to  pay  no 
more  interest  upon  the  debt.  A  mere  legislative  enact- 
ment could  annul  the  value  of  the  papers.  Laws,  then, 
give  them  their  worth,  and  their  worth  consists  in  their 
power  to  collect  a  yearly  income,  which  may  be  exchanged 
for  the  products  of  labor. 

Money  could  not  answer  the  purposes  of  a  medium  of 
exchange  unless  it  were  necessary  to  part  with  it  to  make 
it  valuable.  For  this  reason  it  is  made  to  accumulate  no 
interest  in  the  possession  of  its  owner ;  for  if  it  would 
accumulate  interest  in  his  hands,  it  would  be  legally 
equivalent  to  a  bond  and  mortgage  bearing  interest,  or 


THE   POWER   OF  MONEY 


to  productive  property,  and  the  owner  would  not  need 
to  part  with  it  to  make  it  productive. 


SECTION  V. 

THE  POWER  OP  MONEY  TO  EXCHANGE  VALUE. 

Another  power  of  money  is  to  exchange  property. 
t"When  it  is  made  the  public  representative  of  value,  and 
the  interest  is  fixed  at  a  just  rate,  it  is  fitted  to  perform 
the  duty  of  money,  which  is  the  equitable  exchange  of 
property.  All  goods,  wares,  and  merchandise,  although 
they  may  be  exchanged  for  money  a  number  of  times, 
soon  find  a  place  where  they  are  consumed ;  but  money 
never  reaches  a  point  where  it  can  be  used  except  as  a 
tender  in  exchange  for  property.  Making  a  silver  dollar 
an  equivalent  or  tender  in  payment  for  a  debt  contracted 
by  the  purchase  of  a  bushel  of  wheat,  does  not  make  the 
dollar  possess  the  nutritious  qualities  of  the  wheat,  more 
than  giving  a  note  upon  the  purchase  of  a  hundred 
bushels  of  corn  makes  the  note  of  as  great  actual  value 
as  the  corn.  The  value  of  the  note  depends  upon  its 
power  to  exchange  itself  for  the  property  of  the  drawer, 
and  not  on  the  worth  of  the  paper  upon  which  the  note 
is  drawn.  But  the  value  of  the  corn  depends  upon  its 
nutritious  qualities,  and  not  upon  any  power  to  exchange 
itself  for  the  property  of  the  person  who  raised  or  sold  it. 
The  note  must  be  exchanged  for  property  before  it  can 
be  useful  to  its  owner ;  money  must  also  be  exchanged 
for  property  to  become  useful. 

This,  then,  is  the  distinction  between  articles  of  actual 
value  and  the  medium  of  exchange.  The  former  are 
designed  to  be  actually  used  or  consumed ;  the  latter  is 
designed  to  be  continually  exchanged  for  articles  for 
actual  use  and  consumption.  Hence  money  is  not  mer- 


TO   EXCHANGE   VALUE.  69 

chandise,  for  if  its  material  be  used  as  a  commodity — if 
coins  be  converted  into  watch-cases  and  ornaments,  the 
owner  must  keep  them  to  make  them  useful. 

The  object  of  the  institution  of  money  is  to  facilitate 
the  exchange  of  commodities ;  and  this  it  could  never  do 
unless  it  were  possessed  of  as  much  legal  value  as  the 
thing  for  which  it  is  to  be  exchanged  possesses  actual 
value.  If  a  farmer  has  five  hundred  bushels  of  wheat, 
with  which  he  wishes  to  buy  sugar,  coffee,  tea,  molasses, 
clothing  and  so  forth  for  his  family,  he  will  not  sell  the 
wheat  for  five  hundred  dollars,  unless  the  money  will  be 
a  legal  equivalent  for  all  the  articles  for  which  he  wishes 
to  exchange  his  wheat.  He  does  not  want  the  money  to 
keep  ;  he  wants  it  to  exchange  for  other  articles  that  he 
needs  to  use  or  consume,  and  he  sells  his  wheat  for 
money  because  the  money  is  a  legal  equivalent  for  every 
species  of  property.  It  would  be  very  difficult  for  him 
to  divide  up  the  wheat  and  barter  it  for  various  articles 
in  different  places  ;  and  the  wheat  is  not  a  tender.  But 
he  can  divide  up  his  money  in  amounts  to  suit  all  his 
purchases,  and  the  money  is  a  legal  tender  in  payment. 
A  man  may  carry  a  piece  of  paper  money  in  his  pocket 
that  is  a  legal  equivalent  for  a  valuable  farm  in  any  part 
of  the  country,  when  if  he  had  the  same  amount  of  actual 
value,  it  might  be  impossible  for  him  to  move  it ;  but  he 
can  sell  it  for  money,  and  the  money  he  can  carry  in  his 
pocket  and  buy  with  it  where  he  pleases. 

Some  writers,  instead  of  considering  money  as  a 
medium  of  exchange,  call  it  capital  seeking  investment. 
If  money  be  capital,  it  is  already  invested  ;  because  the 
capital  would  consist  in  the  inherent  value  of  the  mate- 
rial of  the  money,  and  not  hi  the  thing  the  money  seeks 
to  obtain.  But,  when  money  has  found  one  investment,  it 
is  as  much  a  seeker  for  a  second  and  a  third  investment, 
as  if  it  had  not  been  invested  at  all.  It  is  always  seeking 


70  THE   LEGAL   POWERS   OF   MONET. 

investment,  without  being  invested.*  It  is  no  more  real 
capital  than  a  very  poor  horse,  of  which  the  appearance  is 
such  that  he  will  do  very  well  to  exchange  off.  But  if  he 
should  finally  fall  into  the  hands  of  a  person  who  had  not 
the  good  fortune  to  exchange  him  again  for  something 
else,  the  owner  would  have  to  depend  upon  his  few  useful 
qualities.  And  if  a  currency  were  formed  in  the  various 
nations  independently  of  gold  and  silver,  and  coins  should 
cease  to  be  a  tender  in  payment  of  debts,  the  value  of 
•  coins  would  depend  upon  their  inherent  qualities,  as 
metals,  as  much  as  the  value  of  the  horse  when  he  could 
bejio  longer  exchanged  for  more  than  his  actual  worth, 
would  depend  upon  the  little  labor  that  he  could  perform, 
or  upon  his  hide  and  bones.  The  price  of  the  gold  and 
of  the  horse  would  then  depend  upon  their  actual  useful- 
ness, and  not  upon  any  capabilities  for  exchange. 

Money  is,  then,  a  combination  of  legal  powers,  ex- 
pressed upon  metal,  paper,  or  some  other  substance  ;  its 
value  is  the  standard  or  determiner  of  the  value  of  all 
other  things,  and  it  serves  as  a  public  medium  of  ex- 
change for  land,  labor,  and  all  commodities. 

*  We  are  accustomed  to  say  that  money  is  invested  in  property, 
but  this  is  not  true.  Money  is  no  more  invested  in  property  than  the 
yard-stick  is  invested  in  the  cloth  that  it  measures.  When  money 
has  passed  from  one  person  to  another  either  as  a  loan  or  in  payment 
for  property,  it  is  ready  to  be  lent  again  or  to  be  paid  for  another 
piece  of  property.  The  money  is  no  more  used  up  by  passing  from 
one  person  to  another  than  the  yard-stick  is  used  up  by  measuring  a 
single  piece  of  cloth.  We  are  often  told  in  the  money  articles  of  the 
daily  newspapers,  that  the  money  of  the  country  has  been  used  up  in 
railroads  ;  but  upon  travelling  over  these  roads  we  see  evidences  that 
a  great  deal  of  labor  has  been  expended  in  grading  them,  furnishing 
the  iron  and  timber  and  so  forth,  but  we  do  not  see  any  money.  If 
the  money  has  been  invested  in  these  roads,  it  has  now  gone  some- 
where else;  and  it  is  still  going  to  and  fro  in  the  earth,  and  up  nnd 
down  in  it. 


THE  MATERIAL  OF  MONEY.  71 


SECTION  VI. 

THE  MATERIAL  OF  MONEY,  AND  THE  DISTINCTIONS  BE- 
TWEEN MONEY  AND  THE  MATERIAL  OF  WHICH  IT  IS 
MADE. 

The  material  of  money — gold,  silver,  paper,  or  any 
other  substance — is  a  legalized  agent,  made  to  express 
the  four  properties,  or  powers  of  money,  and  render 
them  available  in  business  transactions. 

Common  usage  has  applied  the  term  measure  to  the 
material,  by  means  of  which,  length,  weight,  etc.,  are 
ascertained  ;  as,  for  instance,  the  yard,  pound,  and  bushel, 
instantly  suggest  the  stick,  iron,  and  wood,  the  means 
employed,  rather  than  the  abstract  length,  weight,  and 
size,  which  are,  in  reality,  the  things  signified  by  the 
terms.  It  matters  not  whether  the  yard-stick  and  pound 
weight  be  of  wood,  iron,  or  gold — length  and  weight 
are  the  only  properties  necessary  to  be  expressed  by 
them,  and  possessing  the  standard  limits,  their  material 
is  a  matter  of  indifference.  Of  course,  some  material  is 
indispensable ;  but  the  only  thing  that  makes  one  sub- 
stance preferable  to  another,  is  its  superior  convenience. 
So  of  money ;  it  is  a  matter  of  indifference  by  what 
material  the  powers  or  properties  of  money  are  ex- 
pressed, for  the  material  is  merely  a  substance  fixed  upon 
by  law. 

The  natural  powers  of  any  material  do  not  make  it 
money.  Its  powers  and  agency  as  money  are  delegated 
to  it  by  law,  in  addition  to  its  natural  capabilities 
When  gold  is  used,  the  powers  conferred  upon  it  make 
it  an  equivalent  for  every  species  of  property.  If  gold 
had  not  been  selected  for  the  material  of  money,  and  a 
legal  power  given  to  it  to  exchange  property,  and  to 


72  THE   MATERIAL   OF   MONEY 

accumulate  interest  for  its  use,  a  man  would  have  as  little 
occasion  for  more  gold  than  he  needs  for  utensils  and  or- 
naments, as  for  more  clothes  than  he  can  wear,  or  more 
tools  than  he  can  use.  It  would  have  been  subjected  to 
the  same  laws  of  trade  as  other  merchandise,  and  must 
have  waited  a  demand  for  consumption  before  it  could 
have  been  sold.  It  is  clear  that  gold  possesses  no  pe- 
culiar or  inherent  excellence  to  endow  it  with  power  to 
determine  the  value  and  control  the  use  of  all  other 
things.  But  when  it  is  made  the  agent  of  these  legal 
powers,  it  becomes  necessary  to  acquire  the  gold  iu 
order  to  discharge  debts  ;  and  the  quantity  of  the  metal 
being  limited,  its  owners  are  enabled  to  extort  from  the 
necessitous  a  very  high  price  for  its  use.  If  gold  were 
not  used  as  the  material  of  the  currency,  its  abundance 
would  cause  no  inflation  of  business,  nor  would  its 
scarcity  produce  distress,  because,  compared  with  other 
metals,  its  use  is  very  limited. 

The  following  statement  will  show  the  different  effects 
upon  our  own  people  of  the  use  of  the  precious  metals  as 
utensils,  and  their  use  as  the  material  of  money.  All  will 
probably  admit  that  there  were,  in  1846,  twelve  thousand 
families  in  the  city  of  New  York,  owning,  on  an  average, 
$800  worth  of  gold  and  silver  ware,  such  as  tea,  coffee, 
and  dinner  services,  vases,  omaments,  etc.  Including 
jewelry,  the  amount  of  the  metals  probably  far  exceeded 
the  sum  named.  But  calculating  the  twelve  thousand 
families  to  have  owned  $800  worth  each,  they  owned, 
in  the  aggregate,  $9,600,000  ;  while,  according  to  the 
Bank  Reports,  the  specie  in  all  the  banks  in  the  State 
of  New  York  on  the  1st  day  of  November,  1846, 
amounted  to  but  $8,048,348.  Suppose  the  twelve  thou- 
sand families  owning  these  silver  and  gold  utensils  and 
ornaments,  had  in  one  week  collected  them  together,  and 
shipped  them  to  England.  The  shipping  of  these  wares 
would  have  had  no  more  effect  upon  the  monetary  affairs 


A   LEGALIZED   AGENT.  73 

of  the  State  or  nation,  nor  upon  business,  than  the  ship- 
ping of  the  same  amount  in  cotton  and  tobacco.  But  had 
the  people  drained  the  $8,048,348  of  coins  from  the  banks, 
and  shipped  them  abroad,  the  banks  throughout  the 
State,  and  throughout  the  United  States,  would  have 
been  compelled  to  suspend  specie  payments,  and  hun- 
dreds of  thousands  of  our  people  would  have  been 
bankrupted  or  thrown  out  of  employment.  Yet,  by 
shipping  the  gold  and  silver  wares,  more  than  one 
million  and  a  half  more  of  the  precious  metals  would 
have  left  the  country,  than  by  shipping  the  coins.  The 
shipment  of  the  smaller  amount  would  have  shaken 
the  country  to  its  centre,  while  the  shipment  of  the 
larger  amount,  could  not  have  unfavorably  affected  busi- 
ness. And  yet  our  gold  and  silver  utensils  and  orna- 
ments are  more  in  use  than  our  coins  ;  for  the  coins  are 
mostly  in  kegs  and  boxes  in  the  vaults  of  banks,  and 
if  they  are  moved  at  all,  it  is  usually  from  one  bank 
vault  to  another,  without  even  emptying  them  from 
the  kegs.  If  money  is  merchandise,  why  would  not 
the  shipment  of  our  gold  and  silver  utensils  affect  the 
business  of  the  nation,  as  much  as  the  shipment  of 
our  coins  ?  The  same  twelve  thousand  families  were 
doubtless  the  owners  of  a  much  larger  amount  of  the 
capital  stocks  of  the  banks  than  the  $9,600,000  ;  and 
could  at  any  time  have  sold  stock  enough  to  draw  all  the 
specie  from  the  banks,  and  thus  have  caused  a  suspen- 
sion of  payments,  and  distressed  producers,  even  with- 
out shipping  the  specie. 

If  the  value  of  money  inhere  in  the  precious  metals, 
so  that  a  certain  weight  naturally  possesses  a  certain 
amount  of  power  to  exchange  property,  and  still  is  itself  a 
commodity,  the  value  of  Avhk-h  is  fixed  by  law,  other  com- 
modities made  of  the  same  naturally  precious  metals,  watch- 
cases,  spoons,  etc.,  should  likewise  be  subject  to  the  scru. 
tiny  and  restriction  of  government,  that  the  public  may  not 
4 


74  THE   MATERIAL   OF   MONET 

be  imposed  upon  in  the  receipt  of  them  by  any  mixture 
of  alloy.  If  money  be  a  commodity,  why  do  governments 
pretend  to  fix  a  value  upon  coins,  and  not  upon  any  other 
commodity,  although  it  be  made  of  gold  or  silver  ?  If  a 
definite  value  be  assigned  to  one  commodity  by  legal  en- 
actment, a  definite  value  should  also  be  legally  assigned 
to  every  other  commodity,  that  each  may  sustain  a  just 
relation  according  to  the  amount  of  labor  necessary  to 
manufacture  or  produce  it.  If  money  be  a  commodity, 
goods  sold  might  as  well  be  made  payable  in  other  com- 
modities, sugar,  beef,  etc.,  as  in  money.  Why  not  as 
well  sell  money  on  time  payable  in  goods,  as  goods  on 
time  payable  in  money?  If  money  be  a  commodity, 
why  should  the  government  force  the  public  to  convert 
every  other  commodity  into  this  one  to  pay  debts?  If 
the  sale  and  purchase  of  all  other  commodities  will 
cause  debts  to  exist,  why  should  one  commodity  only 
be  competent  to  pay  them?  And  why  should  the 
value  of  every  other  commodity  be  determined  by  this 
one  commodity  ?  If  money  be  a  commodity,  why  does 
the  government  reserve  the  right  to  coin  it,  making  its 
private  coinage  a  criminal  offence  ?  Why  not  let  any 
one  make  it,  and  dispose  of  it  in  market  as  of  any  other 
commodity  ?  If  money  be  merchandise,  why  is  it,  that 
it  can  be  at  all  times  exchanged  for  property  and  products, 
in  any  part  of  the  country,  and  that  all  other  more 
necessary  commodities  are  at  certain  times  esteemed 
almost  worthless,  compared  with  it  ?  It  is  answered, 
that  it  is  because  it  is  made  by  law  a  legal  tender  in 
payment  for  debts — that  it  has  this  superiority  over 
every  other  commodity.  But  the  very  answer  proves 
that  it  is  not  a  commodity;  for  a  legal  tender  is  a 
creation  by  law  of  certain  properties  which  do  not 
naturally  belong  to  any  substance,  but  which  are  made 
to  represent  all  substances,  and  to  control  their  exchange. 
Governments  have  enacted  their  monetary  laws  upon  the 


A  LEGALIZED  AGENT.  75 

false  principle  that  the  gold  and  silver  metals  had  an 
intrinsic  value,  and  consequently  a  power  in  their 
material,  before  they  were  instituted  as  money,  equal  to 
their  legal  power  and  value  after  being  so  instituted. 

It  is  sometimes  said,  that  commodities  are  a  sort  of 
currency,  because  they  can  be  and  are  exchanged  for 
money.  But  though  a  bushel  of  wheat  may  be  exchanged 
for  money,  it  does  not  possess  any  of  the  legal  and  distinc- 
tive properties  of  money.  The  wheat  does  not  become 
money  more  than  a  watch  would  become  land  by  being 
given  in  exchange  for  land. 

Some  argue  that  the  dollar  derives  its  value  from  the 
labor  required  to  mine  and  coin  the  silver  for  it.  They 
say  that  if  a  day's  labor  be  required  to  mine  the  silver 
for  a  dollar,  and  a  day's  labor  be  required  to  raise  a 
bushel  of  wheat,  the  silver  and  the  wheat  are  of  equal 
worth,  and  that  the  legal  acts  of  the  government  cannot 
alter  the  value  of  either.  But  if  the  equal  amount  of 
labor  expended  make  the  dollar  and  the  wheat  of  equal 
value,  why  will  the  dollar  at  certain  periods  buy  two 
or  three  times  more  wheat,  or  more  labor,  than  it 
•will  at  other  periods  ?  Why  does  not  the  value  of  la- 
bor and  of  wheat  increase  equally  with  the  value  of  the 
dollar  ? 

When  the  products  of  labor  command  a  high  price, 
labor  also  commands  a  high  price.  A  given  quantity  of 
wheat  or  of  other  pi'oducts  will  pay  for  nearly  the  same 
amount  of  labor  every  year.  But  if  the  price  of  products 
be  low,  the  employer  cannot  pay  to  labor  a  high  price  in 
money.  In  seasons  of  depressed  prices,  a  dollar  will 
purchase  double,  treble,  or  quadruple  the  amount  of 
labor  that  it  ordinarily  will,  and  this  difference  occurs 
when  no  more  labor  is  required  to  mine  and  coin  the 
silver.  Let  those  who  maintain  the  theory,  that  the 
labor  required  to  procure  money  constitutes  its  value, 
account,  if  they  can,  for  these  facts,  so  as  to  satisfy 


76  THE   MATERIAL   OF   MONEY 

laborers  and  producers,  the  reward  of  whose  labor,  and 
t]je  price  and  sale  of  whose  products  it  so  nearly  affects. 

Because  money  is  held  in  lieu  of  labor  performed,  and 
in  lieu  of  everything  valuable,  the  public  have  been 
accustomed  to  consider  money  an  actual  equivalent  in 
value  to  the  commodity  or  labor  it  will  pay  for ;  whereas 
in  fact,  it  is  only  a  legal  equivalent  or  balancing  power. 
Air,  water,  food,  clothing  and  a  vast  variety  of  other 
things  are  essential  to  the  existence  and  comfort  of  man, 
and  no  one  thing  can  be  an  actual  equivalent  for  them. 
It  is  as  impossible  that  ten  pounds'  weight  of  gold  should 
possess  equal  actual  value  with  the  four  thousand  bushels 
of  corn,  or  four  thousand  days'  labor  which  the  gold  will 
purchase,  as  that  a  small  quantity  of  poison,  frequently 
necessary  as  a  medicine  to  restore  man  to  soundness  and 
health,  should  be  of  equal  value  with  the  corn  or  labor. 
As  many  elements  for  the  support  of  man  exist  in  the 
poison,  as  in  the  money.  Both  are  useful  in  their  spheres, 
the  former  to  remove  obstructions  to  health,  the  latter  to 
facilitate  the  exchange  of  products.  Poison  is  of  little 
value  compared  with  food ;  and  money  is  as  little  valuable 
compared  with  property.  It  would  be  as  reasonable  to 
esteem  the  comet  which  appears  once  in  a  century,  more 
valuable  to  us  than  the  sun  that  daily  sheds  its  fertilizing 
beams  upon  the  earth,  as  to  esteem  the  actual  value  of 
gold  and  silver  equivalent  to  that  of  all  the  necessaries  of 
life.  If  the  quantity  of  gold  were  unlimited,  not  a  thou- 
sandth part  as  much  of  it  would  be  used  as  of  iron. 
The  notion  that  gold  and  silver  are  endowed  by  the 
Creator  with  some  mysterious  value  and  capabilities, 
which  render  them  of  greater  importance  than  the 
ordinary  products  of  labor,  is  an  erroneous  and  pernicious 
one.  Legal  enactments  cannot  alter  the  inherent  proper- 
ties of  metals. 

The  common  opinion  that  the  material  of  a  currency 
must  be  something  scarce  and  difficult  to  procure,  that 


A  LEGALIZED   AGENT.  77 

the  limited  amount  may  render  it  permanently  valuable, 
arises  from  a  misconception  of  the  nature  of  money, 
the  properties  of  which  are  entirely  independent  of  the 
material.  Money  consists  in  the  legal  powers  to  repre- 
sent, measure,  accumulate,  and  exchange  property  and 
products.  It  receives  its  powers  from  law.  If  gold  and 
silver  should  become  as  abundant  as  iron  and  lead,  the 
only  difficulty  in  maintaining  them  the  materials  of  a 
currency,  would  be  the  difficulty  of  protecting  them  from 
counterfeit.  Could  they  be  protected,  it  would  be  as 
unnecessary  to  abandon  them  for  a  currency  on  account 
of  their  abundance,  as  to  abandon  the  use  of  paper  in 
making  obligations,  because  more  exists  than  can  be 
used  for  that  purpose.  If  the  quantity  of  gold  and  silver 
were  unlimited,  and  that  part  of  it  which  was  needed  for 
a  currency  were  made  a  lien  upon  and  representative  of 
property,  there  would  be  nearly  as  great  a  difference 
between  the  value  of  the  metals  so  used  and  bullion,  as 
there  now  is  between  a  paper  obligation  that  is  a  lien 
upon  valuable  property  and  a  piece  of  blank  paper. 

For  ages  gold  and  silver  have  been  esteemed  precious 
metals,  containing  a  large  amount  of  intrinsic  value,  al- 
though their  inadequacy  to  supply  natural  wants  is  mani- 
fest, when  we  imagine  a  man,  with  a  bag  of  coins,  on  a 
desert  island,  and  without  the  power  to  exchange  them 
for  other  articles.  These  metals  have  intrinsic,  or  actual 
value,  and  this  value  consists  in  their  utility  for  utensils 
and  ornaments ;  their  malleability,  ductility  and  beauty 
rendering  them,  for  some  purposes,  superior  to  all  other 
metals.  But  it  will  be  confessed,  that  we  could  far 
better  dispense  with  them  than  with  any  of  the  abundant 
metals,  which  are  in  more  general  and  constant  use, 
and  the  loss  of  which  would  seriously  impair  our  com- 
fort. 

In  early  ages,  gold  and  silver  were,  doubtless,  selected 
for  the  material  of  money  on  account  of  their  scarcity, 


78  THE   MATERIAL   OF  MONEY. 

and  the  amount  of  labor  necessary  to  procure  them ;  the 
same  reason  that  led  the  American  Indians  to  select  the 
beaver-skin  for  a  standard  of  value,  by  which  the  value  of 
all  other  skins  and  commodities  was  estimated.  It  has 
been  already  explained,  that  gold  and  silver,  when  used 
as  money,  cease  to  have  any  other  use.  These  metals 
have,  however,  received  the  sanction  of  governments  as  the 
material  of  money.  The  laws  require  that  coins  used  as 
a  public  tender  shall  contain  a  certain  weight  of  the  au- 
thorized metal — without  which  they  are  illegal,  and  can- 
not be  enforced  as  a  tender.  But  the  only  reason  that 
they  are  not  received  is,  that  they  are  unsanctioned  by 
law.  If  coins  of  base  metal  were  endowed  by  law  with  the 
properties  of  money — that  is,  were  made  representatives 
of  actual  value,  capable  of  accumulating  by  interest,  and  a 
public  tender  for  debts,  they  would  answer  every  purpose 
of  money,  equally  well  with  coins  of  pure  metal.  They 
could  represent,  measure,  accumulate  and  exchange  pro- 
perty, and  these  are  the  sole  properties  and  uses  of  money. 
Therefore  they  would  be  money,  for  anything  that  pos- 
sesses the  properties  of  money,  without  division,  subtrac- 
tion, or  increase,  is  money.  But  if  the  metal  were  used 
for  purposes  of  dentistry,  the  difference  between  the  pure 
and  the  base  would  at  once  appear  ;  for  the  metal  would 
then  be  used  otherwise  than  as  the  material  of  money, 
and  its  utility  would  not  depend  upon  its  legal  powers, 
but  upon  its  natural  capabilities  as  a  metal. 

The  value  of  money,  then,  depends  upon  its  powers 
to  represent,  measure,  accumulate,  and  exchange  value. 
These  powers,  given  to  any.  convenient  material  by  Con- 
gressional enactment,  will  qualify  it  for  a  medium  of  ex- 
change, and  in  every  particular  constitute  it  money. 


CHAPTER,  III. 

THE  RATES  OF  INTEREST  THE  GOVERNING  POWER 
OF  DISTRIBUTION  TO  LABOR  AND  CAPITAL. 


SECTION  I. 

THE  POWER  OF  CAPITAL  TO  ACCUMULATE  PROPERTY  AND 
LABOR  ACCORDING  TO  THE  RATE  OP  INTEREST. 

IN  the  introduction,  labor  was  said  to  bo  the  chief 
producer  of  wealth,  and  the  preceding  chapter  has  been 
devoted  to  the  consideration  of  the  nature  and  powers 
of  money.  The  present  chapter  will  exhibit  the  laws 
which  govern  the  distribution  of  the  wealth,  and  will 
show  the  practical  effects  of  certain  rates  of  interest  upon 
producers. 

The  Constitution  of  the  United  States,  Art.  L,  Sec. 
VIII.  5,  declares,  "  The  Congress  shall  have  power  to 
coin  money,  regulate  the  value  thereof,  and  of  foreign 
coin,  and  fix  the  standard  of  weights  and  measures." 
Money  is  the  legal  standard  of  value,  by  which  the  value 
of  all  articles  for  sale  must  be  determined.  The  rate  of 
interest  fixes  the  value  of  money.  Its  value  is  no  more 
fixed  by  the  quantity  or  the  quality  of  its  material,  than 
the  size  of  the  bushel  is  fixed  by  the  quantity  and  quality 
of  its  wood.  The  rate  of  interest  maintained  upon  loans 
of  money,  determines  what  proportion  of  the  earnings  of 
labor  shall  be  paid  for  the  use  of  capital,  and  what  pro- 

79 


80  THE   KATES    OF  ESTTEKEST   GOVERN 

portion  shall  be  paid  to  the  laborers  for  their  productions. 
If  interest  on  money  be  maintained  at  a  high  rate,  rents 
on  property  will  also  be  high. 

There  are  but  two  purposes  to  which  the  yearly  pro- 
ducts of  labor  can  be  applied.  One  is  the  payment  of  the 
yearly  rent  or  interest  on  the  capital  employed,  and  the 
other  is  the  payment  of  labor.  If  laborers  pay  to  capital, 
as  use  or  interest  for  the  year,  their  whole  surplus  pro- 
ducts, the  laboi-ers,  as  a  body,  work  for  a  mere  subsist- 
ence, and  the  capital  takes  their  whole  surplus  earnings. 
The  laborer  receives  for  his  year's  toil,  food,  clothing  and 
shelter  only,  and  these  perhaps  of  the  poorest  kind  ;  while 
the  capitalist  lives  in  luxury,  increases  the  number  of  his 
bonds  and  mortgages,  or  with  his  income  buys  land  or 
builds  houses  to  let,  which  will,  in  succeeding  years,  take 
a  still  greater  sum  from  the  laborer.  The  law  of  interest, 
or  per  centage  on  money,  as  much  governs  the  rent  or 
use  of  all  property,  and  consequently  the  reward  of  labor, 
as  the  law  of  gravitation  governs  the  descent  of  water. 
If  the  interest  on  money  be  too  high,  a  few  owners  of 
capital  will  inevitably  accumulate  the  wealth  or  products 
of  the  many.  With  the  present  accumulative  power  of 
interest,  there  is  no  more  chance  of  the  laboring  classes 
gaining  their  rights  by  combining  their  labor  to  increase 
production,  than  there  would  be  hope  of  success  that  by 
combining  their  labor  they  could  reverse  the  course  of 
the  rivers,  and  make  them  run  to  the  tops  of  the  moun- 
tains, and  pile  up  the  waters  on  their  summits.  The  law 
of  gravitation,  in  the  latter  case,  would  not  be  more  sure 
to  overpower  all  their  labor,  and  frustrate  all  their  plans, 
than  the  present  governing  power  of  the  interest  on 
money  is  sure  to  gather  up  the  increased  production  and 
add  it  to  the  wealth  of  capitalists.  The  fault  is  in  the  law 
which  governs  the  distribution  of  property ;  and  combi- 
nations to  increase  production  would  no  more  effect  any 
general  change  in  the  distribution,  than  combinations 


THE  DISTRIBUTION   OF   WEALTH.  81 

against  the  law  of  gravitation  would  effect  a  change  in 
its  general  governing  powers.  The  evil  is  legislative,  and 
the  remedy  must  be  legislative. 

Money  loaned  on  interest  or  invested  in  property,  is 
doubled  in  a  certain  length  of  time,  determined  by  the 
rate  of  interest.  "When  this  rate  is  too  high,  it  requires 
the  principal  to  be  doubled  in  so  short  a  time,  that  the 
borrower  is  compelled  to  give  all  his  surplus  products  as 
interest  or  rent ;  whereas,  justice  requires  that  he  should 
pay  only  a  moderate  per  centage  for  the  use  of  capital, 
and  himself  retain  the  chief  surplus  of  his  labor. 

The  following  illustrations,  calculating  property  to 
accumulate  or  double  at  certain  rates  of  yearly  per  cent- 
age,  in  the  same  manner  as  money,  will  clearly  exhibit 
the  various  results  to  laborers  from  various  rates  of  inte- 
rest. A.,  B.,  and  C.  are  young  men,  who  have  just  come 
of  age.  C.  is  heir  to  §10,000,  while  A.  and  B.  are  mecha- 
nics, without  capital.  C.  contracts  with  A.  and  B.  to 
build  a  house  which  shall  cost  $5,000,  on  a  lot  for  which 
he  paid  $5,000.  The  house  and  lot  together  are  worth 
$10,000.  C.  leases  this  property  to  A.  and  B.,  and 
charges  them  seven  per  cent,  upon  its  cost,  clear  of  insu- 
rance, taxes  and  repairs.  The  interest  is  payable  once 
a*  quarter.  A  rate  of  interest  of  seven  per  cent,  per 
annum,  paid  quarterly,  will  accumulate  a  sum  equal  to 
the  principal  loaned  or  invested  in  property  in  ten  years. 
At  this  rate,  in  ten  years  A.  and  B.  are  compelled  to  buy 
another  lot,  build  upon  it  another  as  good  a  house,  and 
pay  the  lot  and  house  to  C.  for  the  use  of  the  house  they 
occupy.  In  twenty  years,  if  A.  and  B.  retain  the  use  of 
the  house  and  its  accruing  rents,  they  must  pay  C.  three 
houses  ;  in  thirty  years  they  must  pay  him  seven  houses  ; 
in  forty  years,  fifteen  houses ;  in  fifty  years,  thirty-one 
houses ;  in  sixty  years,  sixty-three  houses  ;  and  in  seventy 
years,  one  hundred  and  twenty-seven  houses.  In  seventy 
years  all  these  must  be  built  by  A.  and  B.,  and  paid  to 
4* 


82  THE   BATES   OF   INTEREST   GOVEEN 

C.  as  the  accumulation  on  the  one  that  he  leased  to  them. 
The  one  hundred  and  twenty-seven  lots  which  A.  and  B. 
earn  the  money  to  buy,  cost  $635,000,  and  the  buildings 
cost  an  equal  amount,  making  together,  $1,270,000; 
which  sum  is  paid  to  C.  for  seventy  years'  rent  of  one 
house  and  lot  worth  $10,000.  At  the  expiration  of  the 
lease,  the  original  house  must  be  returned  to  its  owner, 
as  well  as  the  rent.  If,  instead  of  being  invested  in  the 
house  and  lot,  the  $10,000  were  loaned  on  interest  at 
seven  per  cent.,  and  the  interest  were  collected  and 
reloaned  quarterly,  the  money  would  accumulate  in  a 
given  period  precisely  the  same  amount  as  the  pro- 
perty. 

Now,  suppose  interest  to  be  at  three  per  cent,  per 
annum,  and  A.  and  B.  to  build  the  house,  and  pay  C. 
three  per  cent,  annually  on  its  cost  of  $10,000.  This  is 
$300,  instead  of  $700  a  year ;  and,  at  this  rate,  the  in- 
terest on  money,  collected  and  reloaned  quarterly,  re- 
quires nearly  twenty-four  years  to  accumulate  a  sum 
equal  to  the  principal.  Therefore,  in  twenty -four  years 
A.  and  B.  would  give  C.  another  house  ;  and,  in  seventy- 
two  years,  seven  houses,  instead  of  one  hundred  and 
twenty-seven,  which  they  are  compelled  to  do  at  seven 
per  cent,  interest.  The  labor  of  building  the  houses  is 
neither  increased  by  a  high  rate,  nor  diminished  by  a 
low  rate  of  interest. 

If  C.  let  his  house  to  A.  and  B.  at  six  per  cent.,  in 
about  twelve  years  the  income  or  rent  will  equal  the 
principal ;  therefore,  at  the  expiration  of  that  period,  A. 
and  B.  must  pay  C.  another  house,  and  in  twenty-four 
years,  they  must  pay  him  three  houses.  But  if  C.  lease 
the  house  to  them  for  twenty-four  years  at  three  per 
cent.,  A.  and  B.  return  him  his  house,  adding  one  to  it  as 
its  rent,  and  retain  two  houses  as  their  own  surplus. 
With  interest  at  three  per  cent.,  in  twenty-four  years  A. 
and  B.  would  each  own  a  house  and  lot  worth  $10,000  ; 


THE   DISTRIBUTION   OF   WEALTH.  83 

while,  with  the  interest  on  money  loaned  or  invested  in 
property  at  six  per  cent,  both  would  still  be  tenants,  al- 
though they  would  have  performed,  in  both  cases,  the 
same  amount  of  labor.  With  interest  at  three  per  cent., 
in  forty-eight  years  they  would  give  C.  three  houses, 
instead  of  fifteen,  as  at  six  per  cent.,  and  they  would  own 
twelve  as  the  surplus  product  of  their  labor.  But  at  six 
per  cent.,  C.'s  capital  would  compel  A.  and  B.  to  con- 
tinue his  tenants,  and  to  build  for  him  sixteen  houses 
more  during  the  next  twelve  years. 

Take  another  example  of  the  accumulation  of  property 
at  seven  per  cent,  interest.  At  the  age  of  twenty-one, 
D.  owns  a  well  improved  farm  of  one  hundred  acres.  He 
leases  it  to  E.  at  an  interest  of  seven  per  cent.,  payable 
in  land,  as  the  interest  on  money  is  payable  in  money. 
At  the  close  of  the  year,  E.  pays  D.  seven  acres  of  as 
good  quality  as  the  one  hundred  rented,  and  with  a,  pro 
raid  proportion  of  buildings  upon  them.  D.  continues 
to  let  the  farm  to  E.  requiring  him  to  pay  the  rent  in 
land  half-yearly,  as  interest  on  money  is  paid  half-yearly 
in  money ;  and  to  pay  rent  on  the  land  so  paid,  as  the 
borrower  of  money  pays  interest  on  the  interest  which 
he  adds  half  yearly  to  the  principal.  In  ten  years,  E. 
must  pay  one  farm ;  in  twenty  years,  three  farms ;  in 
thirty  years,  seven  farms ;  in  forty  years,  fifteen  farms ; 
in  fifty  years,  thirty-one  farms;  in  sixty  years,  sixty- 
three  farms ;  and  in  seventy  years,  one  hundred  and 
twenty-seven  farms ;  all  in  as  good  a  state  of  cultiva- 
tion as  the  one  originally  leased.  At  the  age  of  ninety- 
one,  D.  can  bequeath  to  his  posterity  one  hundred  and 
twenty-seven  farms,  from  the  mere  rent  on  one.  These 
farms  E.  must  earn  by  the  labor  of  seventy  year^,  and 
pay  to  D.  for  the  use  of  one  farm.  If  it  were  possible 
for  him  to  earn  the  one  hundred  and  twenty-seven  farms 
to  pay  to  D.,  and  the  rate  of  interest  were  reduced  to 
one  per  cent.,  he  need  pay  to  D.  only  about  one  farm  as 


84  THE   RATES   OF   INTEREST   GOVERN 

rent  for  the  seventy  years,  and  could  retain  one  hundred 
and  twenty-six  as  the  surplus  of  his  labor. 

Again,  suppose  John  and  Richard  to  be  poor  boys, 
each  ten  years  old,  who  expect  to  be  bound  out  at  the 
proper  age  to  learn  the  carpenter's  trade.  But  a  rich 
uncle  bequeaths  to  John  a  house  worth  ten  thousand 
dollars.  It  is  worth  so  much,  because  it  will  rent  for 
seven  hundred  dollars  a  year  over  and  above  taxes,  in- 
surance and  repairs.  John's  guardian  is  a  lawyer,  and 
will  collect  the  rent,  and  loan  it  out  for  him  at  seven  per 
cent,  per  annum,  getting  his  fees  from  those  who  borrow 
the  money.  John  likes  Richard,  and  learns  his  trade 
with  him,  and  earns  his  living  by  his  labor  as  Richard 
does.  John  instructs  his  lawyer  to  purchase  another 
house,  whenever  the  rent  of  the  one  accumulates  to 
enough  to  buy  a  second  equal  to  the  first.  If  the  in- 
terest be  regularly  collected  aiid  loaned  at  seven  per 
cent.,  and  the  interest  be  collected  half  yearly,  it  will 
equal  the  principal  in  ten  years  and  one  month ;  when 
his  lawyer  can  buy  for  John  a  second  house,  so  that 
when  he  is  twenty  years  and  one  month  old,  he  will 
be  the  owner  of  two  houses.  These  two  houses,  rented 
for  ten  years  and  one  month  more,  will  buy  for  John  two 
houses  more  ;  so  that  at  the  age  of  thirty  years  and  two 
months,  he  will  own  four  houses :  at  forty  years  and 
three  months,  he  will  own  eight  houses :  at  fifty  years 
and  four  months,  sixteen  houses  ;  at  sixty  years  and  five 
months,  thirty-two  houses ;  at  seventy  years  and  six 
months,  sixty-four  houses  ;  and  at  eighty  years  and  seven 
months  of  age,  he  will  own  one  hundred  and  twenty- 
eight  houses,  each  of  which  is  rented  at  seven  hundred 
dollars  a  year ;  and  all  of  them  together  are  bringing  in  a 
clear  yearly  income  of  eighty-nine  thousand  six  hundred 
dollars.  Now  what  has  John,  or  his  uncle,  or  his 
guardian,  done,  that  the  public  should  be  obliged  to  give 
John  one  hundred  and  twepty-seyen  houses  for  seventy 


THE   DISTRIBUTION   OF   WEALTH.  85 

years'  use  of  one  house  ?  These  one  hundred  and 
twenty-seven  houses  are  all  legally  his;  and  our  laws 
maintain  that  John  has  as  equitable  a  right  to  them  as  if 
he  had  bought  the  lots  and  built  the  houses  by  his  own 
labor.  Yet,  if  we  allow  labor  to  be  worth  a  dollar  a  day, 
it  would  take  the  entire  earnings  of  sixty  men  for  over 
seventy  years  to  pay  for  the  one  hundred  and  twenty- 
seven  houses,  which  the  use  of  the  one  house  has  in 
seventy  years  legally  acquired  for  John,  without  the  per- 
formance of  any  labor  on  his  part. 

Let  us  see  how  different  would  be  the  results  in  this 
case  if  the  interest  on  money,  and  consequently  the  rents 
on  property,  were  at  one  per  cent,  per  annum,  instead  of 
at  seven  per  cent.  John's  uncle  bequeaths  to  him  the 
house  worth  ten  thousand  dollars  ;  but,  instead  of  renting 
it  at  seven  per  cent,  on  its  value,  John  can  rent  it  at  but 
one  per  cent,  over  and  above  taxes,  insurance  and  re- 
pairs, and  regularly  collects  and  loans  out  the  rent  as  in 
the  former  case.  It  would  be  about  seventy  years  before 
the  rent  and  the  accruing  interest  on  the  rent  would 
equal  the  principal,  and  buy  for  John  a  second  house  as 
valuable  as  the  first.  "With  interest  legally  fixed  at  one 
per  cent,  the  use  of  one  house  for  seventy  years  would 
accumulate  for  John,  out  of  the  earnings  of  others,  one 
additional  house  of  equal  value,  whereas,  at  seven  per 
cent,  it  would  accumulate  for  him  one  hundred  and 
twenty-seven  houses.  Whether  the  government  fix 
the  rate  of  interest  at  seven  or  at  one  per  cent,  the  public 
must  provide  the  same  quantity  of  material  and  perform 
precisely  the  same  amount  of  labor  to  build  the  one  hun- 
dred and  twenty-seven  houses  ;  but  with  the  interest  at 
seven  per  cent.  John  would  lawfully  own  them  all,  whereas 
with  interest  fixed  at  one  per  cent,  he  would  lawfully 
own  but  one  house  out  of  the  one  hundred  and  twenty- 
seven  houses,  and  otherswould  lawfully  own  the  remain- 
ing one  hundred  and  twenty-six  houses.  To  furnish  the 


86  THE   KATES   OF   INTEREST   GOVERN 

materials  and  build  these  houses,  requires  not  only  skill  in 
the  mechanical  arts,  but  also  the  performance  of  an 
immense  amount  of  manual  labor.  But  to  give  the  one 
hundred  and  twenty-seven  houses  to  John,  who  is  fairly 
entitled  to  but  one  of  them  for  the  use  of  the  one  he 
rented,  is  the  legitimate  operation  of  the  law  fixing  the 
interest  at  seven  per  cent.  What  chance  have  the  pro- 
ducing classes  by  any  combination  of  labor  to  contend 
successfully  against  such  an  accumulating  and  centraliz- 
ing power  ?  They  might  as  well  venture  into  the  sea, 
with  the  wind  blowing  a  hurricane,  and  expect  by  their 
bodily  strength  to  turn  back  the  waves.  The  sea  would 
not  be  more  certain  to  sweep  over  them,  and  pursue  its  on- 
ward course,  than  the  accumulative  power  of  money  at 
seven  per  cent,  interest  yearly  to  gather  up  the  surplus 
earnings  of  labor  despite  all  combinations  of  labor  against 
it.  If  the  producers  ever  gain  their  rights,  it  will  be  by 
legally  controlling  the  power  of  money,  and  not  by  any 
combinations  of  labor. 

If  a  hundred  dollars  can  be  lent  at  seven  per  cent,  inte- 
rest, the  borrower  pays  seven  parts  of  the  whole  for  the  use 
for  one  year.  The  borrower  must  invest  the  money  (for 
it  is  of  no  use  to  keep)  in  laud  or  other  property,  and 
therefore  must  pay  seven  parts  of  the  value  of  the 
property  for  the  use  of  one  hundred  parts  for  a  year. 
But  if  money  be  borrowed  at  one  per  cent.,  of  course 
the  borrower  pays  but  one  part  for  the  use  of  one  hun- 
dred parts  either  of  money  or  property  for  a  year,  hence 
at  this  rate  laborers  would  receive  six  parts  of  their  net 
yearly  earnings  now  paid  to  capital.  A  man  who  labors 
on  his  own  property  gains  for  himself  its  whole  product. 
The  rate  per  cent,  interest  determines  what  proportion 
others  shall  pay  him  for  the  use  of  capital,  which  he  does 
not  need  for  his  own  use.  Suppose  seven  per  cent,  to  be 
the  fixed  rate  of  interest,  and  V.  to  be  a  farmer,  who,  at  the 
age  of  twenty-one,  inherits  five  farms,  worth  ten  thousand 


THE   DISTRIBUTION   OF   WEALTH.  87 

dollars  each.  He  wishes  to  cultivate  one  himself,  and  to 
sell  or  rent  the  remaining  four.  A.,  B.,  C.  and  D.  are 
farmers  without  property,  and  are  obliged  to  hire  their 
farms.  They  cannot  expect  V.  to  rent  them  his  for  less 
than  the  interest  on  the  money  for  which  they  would  sell. 
Suppose  these  men  to  rent  V.'s  four  farms  at  seven  hun- 
dred dollars  a  year  each ;  and  V.  to  collect  his  rent 
yearly,  and  lend  the  money  to  others  at  seven  per  cent.,  and 
yearly  to  collect  and  reloan  this  interest.  The  rent  and 
accruing  interest  upon  the  rent,  in  ten  years  and  three 
months,  would  enable  V.  to  buy  four  additional  farms, 
worth  ten  thousand  dollars  apiece,  which  he  could  rent 
to  four  more  tenants.  In  ten  years  and  three  months, 
the  rent  and  interest  upon  the  rent  of  these  eight  farms 
would  furnish  V.  with  money  to  purchase  eight  farms 
more  of  equal  value,  which  he  could  rent  to  eight  other 
tenants ;  in  a  third  period  of  the  same"  length,  the  rent  and 
interest  upon  the  rent  of  the  sixteen  farms  would  buy 
sixteen  additional  farms  ;  in  a  fourth  period,  the  rent  and 
interest  upon  the  rent  of  the  thirty-two  farms,  would  pur- 
chase thirty-two  more  farms  ;  in  a  fifth  period,  the  rent 
and  interest  upon  the  rent  of  the  sixty-four  farms,  would 
buy  sixty-four  more ;  in  a  sixth  period,  the  rent  and 
interest  upon  the  rent  of  the  one  hundred  and  twenty- 
eight  farms  wrould  buy  one  hundred  and  twenty-eight 
more ;  and  in  a  seventh  ten  years  and  three  months, 
the  rent  and  interest  upon  the  rent  of  the  two  hundred 
and  fifty-six  farms  then  owned  by  V.,  would  buy  for  him 
two  hundred  and  fifty-six  farms  more,  of  equal  value  with 
the  first  farms  which  he  rented  to  A.,  B.,  C.  and  D.  Thus 
V.,  in  seventy-one  years  and  nine  months,  would  become 
the  owner  of  five  hundred  and  twelve  farms,  worth  ten 
thousand  dollars  each,  and  bringing  in  a  yearly  income 
of  seven  hundred  dollars  apiece.  Five  hundred  and 
eight  of  these  farms  would  be  added  to  V.'s  wealth  by  the 
labor  of  his  tenants,  not  to  mention  the  improvement 


88  THE   KATES   OF   INTEREST   GOVERN 

made  on  their  original  value  by  the  labor ;  and  V.  would 
have  had  besides,  the  entire  produce  of  the  one  farm  re- 
served for  his  own  cultivation. 

We  will  now  see  what  would  be  the  result  to  V.  and 
his  tenants  from  the  simple  change  of  the  rate  of  interest 
from  seven  to  one  per  cent.  Suppose  V.,  as  before,  to  in- 
herit five  farms,  each  worth  ten  thousand  dollars,  one  of 
which  he  cultivates  himself.  If  he  should  sell  the  remain- 
ing four  for  ten  thousand  dollars  each,  he  could  lend  the 
money  at  one  per  cent.,  that  is  for  four  hundred  dollars ; 
but  he  rents  the  farms  to  A.,  B.,  C.  and  D.,  at  one  per 
cent,  on  their  value,  and  thus  receives  the  same  income. 
If  V.  should  loan  this  yearly  rent  of  one  hundred  dollars 
on  each  farm,  yearly  collecting  and  reloaning  the  interest, 
nearly  seventy  years  would  elapse  before  the  rent  paid 
him  by  A.,  B.,  C.  and  D.,  and  its  accruing  interest,  would 
buy  four  more  farms  of  equal  Value  with  those  rented ; 
whereas,  in  about  the  same  period,  at  seven  per  cent, 
the  rent  and  its  accruing  interest  would  buy  five  hun- 
dred and  eight  farms.  Whether  the  interest  wrere  at 
one  or  at  seven  per  cent.,  V.  would  equally  receive  the 
products  of  his  labor  on  the  farm  that  he  kept  for  his  own 
use  ;  but  at  seven  per  cent.,  he  would  gain  by  the  labor 
of  his  tenants  five  millions  and  eighty  thousand  dollars' 
worth  of  land ;  while  at  one  per  cent,  he  would  gain  by 
their  labor  but  forty  thousand  dollars'  worth.  The  agree- 
ments between  V.  and  his  tenants  appear  on  the  surface 
as  fair  where  they  pay  the  larger  as  where  they  pay  the 
lower  rent ;  because,  in  each  case,  they  conform  to  the 
groundwork  or  foundation  established  by  law  ;  but,  in 
the  latter  instance,  V.'s  tenants  would  as  much  pay  to 
him  the  full  yearly  market  rent  of  his  farms  by  paying 
one  hundred  dollars  apiece,  as  in  the  former  by  pay- 
ing seven  hundred  dollars  apiece.  If  one  acre  of  land 
would  produce  twenty-five  bushels  of  wheat  worth  one 
dollar  per  bushel,  each  of  V.'s  tenants  must  yearly  sow, 


THE   DISTRIBUTION   OF   WEALTH.  89 

gather  and  sell  twenty-eight  acres  of  wheat  to  pay  seven 
hundred  dollars  rent.  Suppose  wheat  to  continue  worth 
one  dollar  per  bushel,  and  the  rent  to  be  diminished  to 
one  per  cent.  ;  with  the  same  industry  and  economy,  each 
tenant  could  pay  the  one  hundred  dollars  rent,  and  re- 
tain for  himself  six  hundred  bushels  of  wheat  as  the  sur- 
plus of  his  labor.  If  V.'s  tenants,  in  about  seventy  years, 
could  earn  and  pay  to  him  five  hundred  and  eight  farms, 
in  the  same  period,  with  the  interest  at  one  per  cent., 
they  could  earn  for  themselves  five  hundred  and  four,  for 
the  other  four  farms  would  pay  all  their  rent  to  V. 
Having  the  entire  produce  of  one  farm  for  his  own  sup- 
port, the  low  rent  of  the  other  four  could  do  him  neither 
injustice  nor  injury;  while  compelling  A.,  B.,  C.  and  D. 
to  pay  the  larger  rent  would  deprive  them  and  others 
of  the  just  reward  of  their  labor ;  and  V.  would  not 
be  really  benefited  by  the  hardships  imposed  upon 
them. 

The  interest  on  money  at  seven  per  cent,  is  as  oppres- 
sive as  the  same  rate  per  cent,  rent  on  land.  Suppose 
V.,  instead  of  renting  his  four  farms,  should  sell  them  for 
$J  0,000  each,  and  loan  the  money  at  the  "legal  rate  of 
seven  per  cent.,  collecting  and  reloaning  the  interest 
yearly.  In  ten  years  and  three  months,  the  principal 
and  interest  together  would  amount  to  $80,000;  in  twenty 
years,  and  six  months,  to  $160,000:  in  thirty  years  and 
nine  months,  to  $320,000  ;  in  forty-one  years,  to  $640,000; 
in  fifty-one  years  and  three  months,  to  $1,280,000;  in 
sixty-one  years  and  six  months,  to  $2,560,000  ;  and  in 
seventy-one  years  and  nine  months,  to  $5,120,000.  Mul- 
tiply $10,000  by  five  hundred  and  twelve,  the  number  of 
farms,  and  it  will  give  the  same  sum.  If  V.  should  sell 
the  four  farms  for  $40,000,  and  lend  the  money  on  bond 
and  mortgage  at  seven  per  cent.,  requiring,  as  is  usual, 
double  the  value  in  land  as  security,  he  would  have  mort- 
gages covering  $10,240,000  worth  of  lauded  estate ;  and 


90  THE   KATES   OF   INTEKEST   GOVERN 

the  people  occupying  this  land  would  be  hard  at  work  to 
pay  him  the  interest;  thus  rapidly  concentrating  wealth  in 
his  hands,  instead  of  diffusing  it  to  supply  their  own  wants. 
But  with  interest  at  one  per  cent.,  $40,000  loaned  for 
seventy  years,  would  accumulate  but  $40,000  more ; 
whereas,  at  seven  percent,  it  would  accumulate  $5,080,000. 
This  difference  in  interest  of  $5,040,000  Avould  be  added 
to  V.'s  wealth  from  the  earnings  of  others,  while  V.'s 
accumulation  of  money  or  increase  of  lands  would  not  add 
either  a  dollar  to  the  quantity  of  money,  or  an  acre  to  the 
quantity  of  land.  It  would  only  have  monopolized  it  for 
V.'s  benefit.  It  would  have  caused  the  people  to  owe 
V.  $5,080,000,  and  make  them.  $5,040,000  poorer  than  if 
interest  had  been  at  one  per  cent.  The  contracts  be- 
tween V.  and  his  tenants  being  made  in  conformity  with 
the  standard  at  seven  per  cent.,  they  must  pay  him  the 
$5,040,000,  or  defraud  him  of  what  is  legally  his  due ; 
and  if  he  voluntarily  take  less  than  this  from  them,  it  is 
an  act  of  charity.  Seven  per  cent,  is  not  the  standard  for 
V.  only ;  it  is  a  public  standard  that  favors  other  capital- 
ists equally  in  the  various  branches  of  business,  and 
imposes  upon  the  producing  classes  generally  obligations 
similar  to  those  it  imposes  upon  V.'s  tenants.* 

*  We  do  not  question  the  right  of  V.  to  inherit  the.five  farms,  and 
to  enjoy  all  the  produce  of  the  one  he  cultivates :  nor  do  we  object  to 
his  receiving  a  just  rent  for  the  use  of  any  other  farms  which  he  may 
own  ;  but  the  rent  of  the  latter  should  be  only  equivalent  to  a  pro- 
per support  of  the  money  by  which  their  value  is  represented  ;  and 
we  claim  that  one,  or  one  and  one-tenth  per  cent,  is  ample  to  pay  for 
the  necessary  material  and  labor  to  furnish  a  representative  that  shall 
be  and  remain  perfectly  secure  and  good.  ...  As  labor  in  all 
useful  departments  should  be  fairly  compensated,  so  also  the  neces- 
sary labor  to  furnish  and  issue  the  money  of  a  nation  should  be  justly 
remunerated;  and  the  per  centage  interest  on  the  money  should  be 
equivalent  to  pay  for  the  needful  material  and  labor  to  furnish  and  lend 
it.  The  interest  ought  not  to  exceed  the  expense  of  the  institution  and 
circulation  of  the  money.  (See  Sec.  XVII.  and  Part  II.,  Chap.  II.) 


THE   DISTRIBUTION   OF  WEALTH.  91 

To  give  some  idea  to  what  extent  the  power  of 
interest  operates,  it  can  only  be  necessary  to  say,  that 
all  the  money  lent  on  bonds  and  mortgages  by  indivi- 
duals, by  insurance  and  trust  companies ;  all  the  money 
lerit  for  United  States,  State,  County,  City,  Railroad, 
Canal  and  other  bonds,  made  to  raise  money  for  public 
improvements,  whether  these  improvements  be  made  by 
corporations,  by  the  States  or  by  individuals;  also  all 
the  money  lent  by  banks,  brokers  and  individuals  on 
promissory  notes — all  these  loans  are  operating  with  a 
like  centralizing  power  against  the  producers  and  in  favor 
of  money-lenders.  This  power  also  establishes  a  like 
rate  per  cent,  rent  to  be  paid  for  the  use  of  all  property, 
real  and  personal.  The  rent  of  houses  and  lots  in  cities, 
and  of  farms  and  houses  in  the  country,  must  conform 
to  this  standard.  All  the  goods,  wares  and  merchan- 
dise on  hand  in  the  nation,  and  that  are  in  process  of 
being  produced  and  manufactured,  are  governed  in  their 
value  by  money,  and  are  under  tribute  to  its  centralizing 
power.  It  is  an  unavoidable  power,  because  it  is  insti- 
tuted, upheld  and  enforced  by  the  national  laws,  and  is 
the  basis  upon  which  all  market  values  are  founded. 

The  following  statement  shows  the  effect  upon  pro- 
ducers of  a  rate  of  interest  on  capital  of  six  per  cent,  per 
annum.  The  yearly  income  of  our  most  wealthy  citizen 
from  dividends  on  State,  bank,  and  other  stocks,  money 
lent  on  bonds  and  mortgages,  and  rents  of  property,  is 
said  to  amount  to  $2,000,000.  Take  the  farmers  of  the 
six  New  England  States,  include  those  of  New  York  and 
New  Jersey,  and  it  is  very  doubtful  whether,  after  paying 
necessary  expenses,  each  makes  a  yearly  gain  of  more 
than  one  hundred  dollars.  According  to  this  calculation 
it  would  require  the  use  of  twenty  thousand  farms,  and 
the  surplus  earnings  of  twenty  thousand  farmers  and 
their  families,  to  clear  $2,000,000  a  year.  However 
difficult  it  might  be  to  trace  the  ways  and  means  by 


92  THE   BATES   OF   INTEREST   GOVERN 

which  this  income  is  gathered,  it  takes  $2,000,000  worth 
of  the  surplus  products  of  labor  to  pay  the  legal  accumu- 
lation on  the  capital.  Suppose  able-bodied  men  to  earn 
one  dollar  per  day,  for  an  average  of  two  hundred 
and  seventy-five  days  in  each  year — i.  e.,  $275.  Two 
millions  of  dollars  would  annually  hire  and  pay  for  the 
labor  of  seven  thousand  two  hundred  and  seventy-six 
men.  Allow  the  receiver  of  the  income  to  expend 
yearly  for  his  own  support  as  much  as  seventy-three 
laborers  earn,  and  he  will  still  receive  a  clear  gain  of 
$1,980,000  yearly,  the  entire  earnings  of  seven  thousand 
two  hundred  and  three  men.  Calculate  the  interest  on 
$1,980,000  at  six  per  cent.,  and  the  next  year  it  will 
make  an  addition  to  his  income  of  $118,800 ;  which  sum 
would  pay  for  the  labor  of  four  hundred  and  thirty-two 
men,  in  addition  to  the  number  employed  in  the  preced- 
ing year.  What  is  the  probable  surplus  that  each  of  these 
laboring  men  would  yearly  retain,  after  deducting  from 
the  $275  their  own  expenses,  and  those  of  their  families? 
Can  any  laboring  community  be  prosperous,  and  pay  so 
great  an  amount  of  interest  on  capital  ?  The  legal  power 
of  money  to  accumulate  an  undue  rate  of  interest,  com- 
pels these  laborers  to  give  aU  their  surplus  products  to 
one  man  for  the  use  of  capital,  while  they  and  their 
families  are  deprived  of  a  good  subsistence,  and  are 
obliged  continually  to  increase  that  capital,  which  yearly 
exercises  a  greater  powrer  over  their  labor. 

In  order  that  the  power  of  the  ordinary  rates  of  inter- 
est to  concentrate  property  in  the  hands  of  capitalists  may 
be  more  clearly  seen,  in  the  following  illustration  the  con- 
tracts shall  be  based  upon  wheat  instead  of  upon  money. 
Take  the  yearly  income  of  Mr.  A.,  say  $2,000,000.  If  his 
money  be  loaned,  or  his  property  be  leased  at  six  per  cent. 
on  its  valuation,  he  must  be  worth  thirty- three  and  a 
third  millions  of  dollars.  Suppose  Mr.  A.,  instead,  to 
own  thirty-three  and  a  third  millions  of  bushels  of  wheat, 


THE    DISTRIBUTION   OF   WEALTH.  93 

Let  him  lend  the  wheat  instead  of  the  money  at  six  per 
cent,,  and  the  interest  will  be  precisely  two  millions  of 
bushels.  The  farmers  who  borrow  the  wheat,  and  give 
their  bonds  and  mortgages  upon  their  farms  to  secure 
the  payment  of  the  principal  and  interest,  must  sow,  reap, 
and  thrash  out  two  millions  of  bushels,  transport  them  to 
New  York,  and  put  them  into  Mr.  A.'s  storehouses,  to  pay 
the  interest  for  one  year.  "What  a  pile  of  wheat  is  this 
for  one  man's  use,  gained  too,  without  his  sowing  or 
harvesting  a  bushel  of  it.  But  suppose  the  interest  to  be 
at  one  per  cent,  instead  of  at  six  per  cent,  and  Mr.  A.  to 
lend  these  same  farmers  the  thirty-three  and  a  third  mil- 
lion s  of  bush  els  of  wheat  at  this  per  centage ;  at  the  end 
of  the  year  they  will  have  to  pay  him  only  three  hundred 
and  thirty-three  thousand  three  hundred  and  thirty- 
three  and  a  third  bushels  of  wheat,  to  satisfy  the 
interest.  The  farmei-s  will  then  retain,  one  million  six 
hundred  and  sixty-six  thousand  six  hundred  and  sixty- 
six  and  two-third  bushels  for  their  own  use,  or  to  sell  to 
others,  or  to  pay  toward  the  principal  of  the  debt.  With 
interest  at  one  per  cent,  they  will  as  much  satisfy  Mr. 
A.'s  yearly  claims,  by  paying  him  the  smaller  quantity  of 
wheat,  as  they  would  at  an  interest  of  six  per  cent,  by 
paying  two  millions  of  bushels.  If  each  acre  of  land 
produce  fifteen  bushels,  and  the  farmers  cultivate  on  an 
average  ten  acres  each,  it  will  take  the  labor  of  thirteen 
thousand  three  hundred  and  thirty-three  farmers,  and  the 
use  of  one  hundred  and  thirty-three  thousand  three  hun- 
dred and  thirty-three  and  a  third  acres  of  land  to  pay 
the  yearly  interest  of  six  per  cent,  on  the  thirty-three  and 
a  third  millions  of  bushels  of  wheat  borrowed  of  Mr.  A. 
But  if  interest  be  at  one  per  cent,  and  the  farmers  con. 
tinue  to  pay  Mr.  A.  the  two  millions  of  bushels  yearly, 
in  eighteen  years  and  four  months  they  will  pay  off  both 
the  principal  and  the  interest  of  the  debt. 

Suppose  the  farmers  to  pay  six  per  cent,  interest,  i.  e-, 


94  THE   BATES   OF   INTEREST    GOVERN 

two  millions  of  bushels  of  wheat  on  the  loan  for  twenty 
years,  they  will  pay  forty  millions  of  bushels  to  satisfy 
the  interest,  and  will  still  owe  the  thirty-three  and  a  third 
millions  principal.  If  Mr.  A.,  as  he  yearly  receives  the 
interest  from  the  farmers,  say  two  millions  of  bushels  of 
wheat  or  $2,000,000,  should  lend  it  out  to  mechanics  at 
six  per  cent,  interest,  and  continue  to  do  this  for  twenty 
years,  adding  yearly  to  the  loan  the  interest  so  accrued, 
it  would  accumulate,  in  the  twenty  years,  to  $73,571,180. 
The  interest  on  this  interest  for  a  year  amounts  to 
$4,414,270,  which  would  yearly  be  due  from  the  mechanics. 
If  the  mechanics,  instead  of  paying  the  interest  in  wheat, 
should  pay  it  in  manufactured  articles,  they  would  pile 
up  an  enormous  quantity  of  goods  in  Mr.  A.'s  storehouses 
for  his  yearly  use.  With  interest  at  six  per  cent.,  at  the 
end  of  twenty  years,  the  fanners  would  owe  Mr.  A. 
$33,333,333,  or  the  same  number  of  bushels  of  wheat,  and 
the  mechanics  would  owe  him  $73,571,180;  together, 
$106,904,513  ;  which  Avould  annually  require  from  the 
farmers  and  mechanics  $6,414,270  worth  of  their  products 
merely  to  pay  the  interest. 

Now  let  interest  be  at  one  per  cent,  per  annum,  and  let 
Mr.  A.  lend  $33,333,333  at  this  rate,  and  in  twenty  years 
the  interest  compounded  yearly  Avould  amount  to  but 
$7,339,666,  instead  of  $73,571,180  ;  making  by  this  sim- 
ple alteration  of  the  rate  of  interest  for  twenty  years,  a 
saving  to  the  farmers  and  mechanics  of  $66,231,514. 

These  calculations  of  the  centralizing  power  of  money 
are  not  based  upon  any  usurious  rates  of  interest,  but 
upon  six  and  seven  per  cent.,  and  the  latter  rate  is  estab- 
lished by  the  State  of  New  York  as  just  and  equitable ; 
and  judgments  in  the  courts  of  law  are  rendered  and 
entered  upon  the  records  accordingly.  These  rates 
of  interest  are  certain  to  take  the  wealth  from  the  pro- 
ducers and  give  it  to  the  financiers.  It  will  be  hereafter 
shown  that  the  rate  of  interest  may  be  easily  reduced  to 


THE   DISTRIBUTION   OF   WEALTH.  95 

one  per  cent.,  or  to  any  other  per  cent,  that  shall  be 
deemed  most  conducive  to  the  general  welfare ;  and  if 
the  people  think  it  more  just  that  the  interest  should 
cease  to  accumulate  wealth  so  rapidly  in  a  few  hands, 
they  will  enact  laws  to  prevent  it.  If  they  will  stop  such 
accumulation  by  interest,  they  will  live  upon  the  pro- 
ducts of  their  own  labor,  instead  of  living  upon  the 
charity  of  capitalists.  If  in  twenty  years  Mr.  A.  should 
bestow  on  the  needy  $66,231,514,  or  the  same  number  of 
bushels  of  wheat,  it  would  be  an  unheard-of  liberality. 
But  if  the  law  of  interest  were  such  that  he  could  not 
legally  take  this  amount  from  the  people,  they  would  retain 
it  in  their  own  possession,  as  the  natural  product  of  their 
labor,  instead  of  being  compelled  to  receive  it  as  a  charity. 

Mr.  A.  now  uses  the  most  of  his  capital  by  investing 
it  in  State  and  other  stocks,  buying  business  notes  at 
large  discounts,  lending  money  on  bond  and  mortgage, 
buying  up  mortgages  bearing  seven  per  cent,  interest  be- 
low their  par  value,  purchasing  property  under  foreclosure, 
etc.  Doubtless  his  object  is  to  obtain  the  best  possible 
per  centage  income  for  the  use  of  his  money  or  property. 
All  that  he  gains  by  these  means  above  six  per  cent, 
interest,  takes  a  still  greater  sum  from  the  earnings  of 
producers. 

Now  suppose  from  this  time  forward  Mr.  A.  should 
determine  to  pursue  a  different  course,  and  to  lay  out 
his  capital  in  such  a  manner  as  to  conduce  in  the  highest 
degree  to  the  welfare  of  the  people  around  him.  To 
support  them  in  idleness  would  be  a  disadvantage  ;  but  to 
employ  them,  and  pay  for  their  work  such  a  price  as 
would  give  them  a  good  subsistence,  and  furnish  them 
with  the  means  of  educating  their  children,  and  to  pro- 
vide for  the  aged  and  needy,  would  be  a  very  benevolent 
disposition  of  his*  wealth.  To  do  this  he  invests  ah1  his 
property  in  the  manufacture  of  cotton  goods.  With 
thirty-three  and,a  third  millions  of  dollars  he  could  carry 


96  INTEREST   GOVERNS   DISTRIBUTION. 

on  an  extensive  business.  He  builds  bis  manufactories, 
and  purchases  machinery.  He  contracts  with  a  number 
of  planters  to  supply  him  for  a  certain  number  of  years 
with  a  given  quantity  of  cotton.  He  also  contracts  with 
workmen  to  perform  the  labor  in  his  mills,  and  agrees  to 
give  to  all  such  prices  as  will  afford  them  and  their 
families  a  comfortable  subsistence,  make  suitable  pro- 
vision for  the  education  of  their  children,  and  support 
those  who  are  unable  to  work  and  dependent  upon  them. 
The  cotton  will,  of  course,  be  always  furnished  at  a  uni- 
form price,  and  the  price  of  labor  will  be  about  the  same 
each  year.  Mr.  A.  now  fixes  the  prices  of  his  goods  so 
as  to  sustain  the  various  people  in  his  employment.  Let 
Mr.  A.  invest  all  his  means  in  mills,  in  stock,  and  labor, 
on  these  terms,  while  the  planters  hire  their  plantations, 
and  the  mechanics,  manufacturers  and  laborers  employed 
by  Mr.  A.  hire  houses  to  live  in,  etc.,  from  others  at  a 
rent  of  seven  or  eight  per  cent,  per  annum,  and  it  will  be 
impossible  for  him,  with  all  his  capital,  to  sustain  himself. 
In  a  very  few  years  he  will  become  bankrupt,  for  he 
must  enable  his  workmen  to  pay  their  rents,  and  give 
them,  besides,  a  comfortable  support.  This  obliges  him. 
to  use  his  own  property  at  a  low  rate  of  interest,  while, 
through  his  workmen,  he  is  compelled  to  pay  a  high  rate 
of  rent  or  interest  for  the  use  of  the  property  of  others. 
The  operation  is,  virtually,  that  the  owner  of  thirty-three 
and  a  third  millions  of  dollars  borrows  an  equal  or  large 
amount  at  six,  seven,  or  eight  per  cent,  interest,  and  rcloans 
the  borrowed  money,  together  with  his  own,  at  an  interest 
of  one,  or  one  and  a  quarter  per  cent.  By  so  doing,  his 
fortune  will  soon  pass  into  the  hands  of  other  capitalists. 
The  present  monetary  laws  of  all  nations  are  opposed  to 
the  reward  of  labor;  and  no  individual  or  national  at- 
tempts justly  to  reward  it,  except  by  changing  these 
laws,  can  secure  any  permanent  success. 


THE   WEALTH   OF   CITIES.  97 


SECTION  II. 

THE  WEALTH   OF    CITIES,   AND  THE    MEANS   OF   ITS    ACCU- 
MULATION. 

The  following  illustration  shows  the  capability  of 
money,  at  an  interest  of  six  per  cent,  per  annum,  to  cen- 
tralize the  wealth  of  nations  in  large  cities. 

Suppose  an  uncultivated  island,  ten  miles  square,  and 
a  few  miles  distant  from  the  coast  of  the  United  States. 
Ten  thousand  wealthy  citizens  of  the  States  intend  to 
build  a  city  upon  it.  These  citizens  are  worth  $150,000 
each ;  in  the  aggregate,  $1,500,000,000.  The  legal 
interest  on  money  is  fixed  at  six  per  cent,  per  anmun. 
For  two  years  previous  to  their  removal  to  the  island,  the 
people  prepare  upon  it  houses  for  themselves,  and  suitable 
accommodations  for  merchants  and  mechanics.  Each  of 
these  families  expends  $3,000  yearly  for  its  support. 
Each  family  being  worth  $150,000,  the  interest  on  which, 
at  six  per  cent,  would  be  $9,000,  each  has  an  income  of 
$6,000  a  year,  over  and  above  expenses.  They  expend 
their  surplus  income  for  two  years,  i.  e.,  $12,000  for  each 
family,  in  the  aggregate  $120,000,000,  in  making  improve- 
ments on  the  island.  They  dispose  of  their  property  on 
the  main  land  on  credit,  securing  it  by  bonds  and 
mortgages,  State  stocks,  or  otherwise,  so  that  they  insure 
an  interest  payable  half  yearly  of  six  per  cent,  per  annum, 
on  the  whole  amount  of  their  property.  These  obliga- 
tions merely  represent  the  value  of  the  property  they 
leave  upon  the  main  land,  and  must  yield  an  income  from 
the  products  of  the  land  and  labor  of  the  purchasers.  The 
annual  interest  on  $1,500,000,000,  amounts  to  $90,000,000. 
The  paper  obligations  held  by  the  creditors  legally 
empower  them  to  demand  an  interest  of  $90,000,000,  in 
specie.  The  mere  giving  of  obligations  is  all  that  is  re- 
5 


98  THE   WEALTH    OF   CITIES. 

quired  in  the  transfer  of  property.  The  conversion  of 
their  property  into  bonds  and  mortgages  and  other  secu- 
rities, may  not  have  required  the  use  of  a  million  of  dol- 
lars of  money.  But  the  payment  of  both  principal  and 
interest  must  be  made  in  money. 

The  ten  thousand  families  contain,  on  an  average,  five 
persons  each,  making,  in  the  aggregate,  a  population  of 
fifty  thousand.  They  employ,  on  an  average,  three 
domestics  in  each  family,  increasing  the  population  to 
eighty  thousand.  The  yearly  expenses  of  each  family 
amount  to  $3,000;  or,  for  the  whole,  to  $30,000,000. 
Hatters,  tailors,  shoemakers,  cabinet-makers,  mechanics 
of  every  sort  collect  about  them  to  supply  their  wants, 
and  receive  the  sums  which  they  expend  in  living.  More 
than  fifty  thousand  laborers  and  artisans  are  needed  to 
supply  their  wants.  In  a  few  years  the  centralization  of 
capital  collects  a  city  of  three  or  four  hundred  thousand 
inhabitants.  The  ten  thousand  families  expend  $30,000,-^ 
000  yearly,  and  draw  besides,  from  the  people  of  the  main 
land,  a  clear  income  of  $60,000,000  a  year,  which  they  can 
reloan.  The  debtors  cannot  send  the  $60,000,000  in 
money,  and  are  therefore  obliged  to  send  the  products 
of  the  soil,  manufactured  articles,  etc.,  to  this  city  for 
sale,  to  procure  money  to  meet  their  payments  of  interest. 
The  city  soon  becomes  the  market-place  of  the  nation, 
and  engrosses  the  principal  business.  The  people  are 
astonished  at  its  wealth  and  prosperity,  and  congratu- 
late themselves  .on  having  so  fine  a  market  for  their 
products. 

In  the  course  of  a  century  or  two,  the  ten  thousand 
families  and  their  descendants  can,  if  they  choose,  with- 
out labor  on  their  part,  build  a  wall  around  their  city  as 
high  and  as  broad  as  the  walls  of  ancient  Babylon. 
Meanwhile,  the  people  upon  the  main  land  are  obliged  to 
supply  all  the  wants,  the  food,  clothing,  etc.,  not  only  of 
the  ten  thousand  families  and  their  descendants  who  do 


THE   WEALTH    OF   CITIES.  99 

no  work,  but  also  of  the  laborers  employed  in  the  erection 
of  the  wall,  in  the  building  of  houses,  and  in  all  other  im- 
provements. Producers  and  manufacturers  from  differ- 
ent parts  of  the  country  carry  their  goods  to  the  city, 
and  the  citizens,  after  selecting  the  choicest  for  their  own 
use,  resell  the  remainder  to  laborers,  who  are  only  able 
to  purchase  the  poorer  kinds.  If  an  account  were  kept 
of  those  sold  to  the  country,  it  would  be  found  that  they 
were  minus  nearly  the  whole  support  of  the  people  of  the 
city.  Now  what  compensation  is  received  by  the  people 
of  the  main  land  for  the  supplies  which  they  furnish  ? 
The  citizens,  indeed,  pay  money  for  the  supplies,  but  this 
money  is  the  interest  on  capital  loaned  to  the  people, 
without  whose  labor  it  would  have  been  useless.  In  a 
similar  manner,  under  the  present  monetary  laws  of 
the  United  States,  a  few  rich  men  in  cities  engross  the 
wealth  of  the  country.  It  is  as  natural  under  these  laws 
for  the  wealth  to  fall  into  a  few  hands  as  for  water  to 
find  its  level  by  its  own  gravitation ;  and  while  our 
present  rates  of  interest  prevail,  no  combination  or  suc- 
cess in  production,  either  by  machinery  or  the  muscular 
power  of  labor,  will  ever  effect  any  important  change  for 
the  better.  But  when  the  laboring  classes  combine  to 
have  good  national  monetary  laws  in  lieu  of  the  present 
evil  ones,  their  united  efforts  will  effect  a  change  in  these 
laws,  and  thus  accomplish  the  object  they  have  so  long 
and  so  anxiously  sought  after.  If  the  interest  in  the 
case  supposed  were  limited  to  'one  per  cent.,  the  income 
for  each  family  would  be  only  $1,500,  or  one-half  of  what 
they  each  year  expend  ;  consequently,  they  must  either 
labor  for  the  other  half,  or  take  a  portion  of  their  princi- 
pal each  year  for  their  support.  It  would,  therefore,  be 
impossible  for  them  to  build  or  sustain  such  a  city. 

The  ten  thousand  most  wealthy  men  in  the  United 
States  are  probably  worth,  on  an  average,  nt  least 
$300,000— in  the  aggregate  $3,000,000,000.  The  annual 


100  THE   WEALTH    OF   CITIES. 

interest  on  this  sum  at  six  per  cent,  would  be  $180,000,000. 
If  these  men  should  sell  their  property,  and  invest  the 
proceeds  in  bonds  and  mortgages  bearing  six  per  cent, 
interest  per  annum,  and  remove  from  the  country,  they 
would  impose  a  tribute  on  the  productive  industry  of  the 
nation  which  would  impoverish  it  for  ages.  It  is  doubt- 
ful whether  the  people  would  ever  be  able  to  pay  and 
satisfy  the  interest  and  principal  of  the  debt.  They 
would  pay  $180,000,000  of  their  products  yearly,  without 
receiving  any  equivalent.  And  yet,  without  the  labor 
of  the  buyers  or  borrowers,  the  property  would  be  use- 
less ;  and  if  the  owners  received  any  benefit  from  it,  they 
would  be  obliged  to  remain  and  cultivate  it  themselves. 
Ought  the  laws  to  be  such,  that  ten  thousand  wealthy 
men,  on  leaving  their  country,  could  impose  such  a  bur- 
den upon  the  millions  left  behind?  If  interest  were 
reduced  to  one  per  cent.,  and  the  ten  thousand  men 
should  sell  their  property,  leaving  the  proceeds  on  in- 
terest at  one  per  cent.,  this  nation  would  pay  them 
$30,000,000  interest  annually.  And  this  would  be  quite 
enough  for  producers  to  pay  for  the  mere  use  of  capital. 
To  show  conclusively  that  the  present  rates  of  interest 
are  the  cause  of  the  accumulation  of  the  wealth  in  our 
cities,  we  will  enter  at  length  into  a  calculation  which 
each  can  test  and  examine  for  himself.  No  one  will  dis- 
pute that  in  the  city  of  New  York  there  are  several  hun- 
dred families  whose  collective  wealth  is  equal  to  $250,000 
for  each  family.  For  our  illustration,  however,  we  will 
take  but  one  hundred  families,  and  supppose  each  of  them 
to  be  worth  equal  to  $250,000 — in  total,  $25,000,000. 
As  five  or  six  of  our  citizens  might  be  pointed  out  who 
are,  in  the  aggregate,  worth  at  least  double  the  sum 
total,  this  calculation  is  a  moderate  one.  Suppose  these 
one  hundred  families  to  emigrate  to  some  desirable  sec- 
tion of  the  country,  and  settle  upon  two  hundred  acres 
of  land,  so  that  each  family  owns  two  acres.  They  con- 


THE   WEALTH   OF   CITIES.  1Q1 

vert  all  their  property  into  money,  or  into  bonds  and 
mortgages  bearing  six  per  cent,  interest,  the  lowest  legal 
rate  of  interest  in  any  State  of  the  Union.  Each  family 
expends  yearly  for  its  support  $3,000,  or  the  interest  at 
six  per  cent,  on  $50,000.  This  sum  would  supply  each 
family  with  the  necessaries  and  luxuries  of  life  without 
the  performance  of  labor  by  any  of  its  members.  Be- 
sides the  $50,000  of  which  they  expend  the  income,  each 
family  has  $200,000— in  the  aggregate,  $20,000,000— 
loaned  at  six  per  cent,  interest,  the  annual  income  of 
which  would  be  $1,200,000.  The  yearly  expenditure  of 
$300,000  (the  interest  on  $50,000  for  each  family)  soon 
collects  near  them  merchants,  mechanics,  laborers,  and 
others,  to  supply  their  wants ;  and  farmers  find  here  a 
market  for  their  produce.  • 

These  families  and  their  posterity  live  without  labor, 
being  determined  to  incur  no  hazard  of  business.  They 
intermarry  for  five  generations,  thirty  years  being  the 
average  duration  of  each.  Upon  marriage,  each  couple 
receives  $50,000,  the  income  on  which,  at  six  per  cent., 
amounting  to  $3,000  a  year,  is  appropriated  to  their  sup- 
port. They  also  receive  their  average  proportion  of  the 
principal.  They  are  forbidden  to  exact  a  higher  rate  of 
interest  than  six  per  cent,  per  annum,  payable  half-yearly, 
and  are  not  at  liberty  to  call  in  the  principal  so  long  as 
the  interest  upon  it  is  regularly  paid.  The  families  con- 
sist of  five  persons  each,  exclusive  of  servants,  amount- 
ing, in  the  aggregate,  to  five  hundred  individuals.  Sup- 
pose them  to  increase  twenty-five  per  cent,  every  twelve 
and  a  half  years.  Each  family  at  the  emigration  had 
$200,000  loaned  at  six  per  cent,  interest,  amounting  to 
$12,000  per  annum;  and,  in  the  aggregate,  on  the 
$20,000,000  owned  by  all,  to  $1,200,000  per  annum. 
This  interest,  collected  and  reloaned  half-yearly,  will 
double  the  principal,  $20,000,000,  in  about  eleven  and 


102  THE   WEALTH   OF   CITIES. 

three-quarter  years ;  but,  to  leave  time  for  the  collection 
and  reinvestment  of  the  interest,  allow  it  twelve  and  a 
half  years  to  double.  The  following  calculations  exhibit 
the  sum  which  would  be  owned  by  the  families  at  the  end 
of  five  generations  of  thirty  years  each,  or /it  the  end  of 
one  hundred  and  fifty  years.  This  calculation  of  the 
centralization  of  wealth  by  interest  is  no  idle  theory,  but 
a  mathematical  demonstration  of  facts,  based  upon  the 
lowest  rate  of  interest  established  by  law  in  any  State — 
a  much  lower  rate,  too,  than  the  average  one  at  which 
money  is  actually  loaned. 

The  following  table  exhibits  the  accumulation  at  the 
rate,  and  under  the  circumstances,  as  above  : 

TABLE 

OF  THE  INCREASE  AT  SIX  PER  CENT.  OP  THE  WEALTH  OF  A  HUNDRED 
FAMILIES  WORTH  $250,000  EACH,  DURING  A  PERIOD  OF  ONE  HUNDRED 
AND  FIFTY  YEARS,  WITH  A  DEDUCTION  OF  THEIR  ANNUAL  EXPENSES. 

100  families  worth  $250,000  each $25,000,000 

Yearly  expenses  of  each  family,  $3,000,  or  the  income 

on  $50,000  at  six  per  cent.— total  for  100  families. .          5,000,000 


Deduct  $5,000,000  for  expenses,  and  there  are  left  to 
accumulate 20,000,000 

The  interest  at  six  per  cent,  paid  half  yearly,  and  re- 
loaned,  will  equal  the  principal  in  111  years ;  but  allow 
12£  years,  and  then  add 20,000,000 


40,000,000 

Add  25  per  cent,  increase  to  100  families  in  12|  years 
— i.  e.,  25  families,  and  deduct  $50,000  for  the  sup- 
port of  each  of  the  25 1,250,000 

Left  to  accumulate 38,750,000 

Add  12£  years  interest,  at  6  per  cent 38,750,000 

77,500,000 

Add  25  per  cent,  increase  to  125  families — i.  e.,  31  fami- 
lies, and  deduct  $50,000  for  each  of  the  31 1,550,000 

Left  to  accumulate 75,950,000 


THE   WEALTH   OF   CITIES.  103 

Left  to  accumulate  (brought  forward) $75,950,000 

Add  12 £  years'  interest  at  six  per  cent 75,950,000 

151,900,000 
Add  25  per  cent,  to  156  families— i.  e.,  39  families,  and 

deduct  $50,000  for  each  of  the  39 $1,950,000 


Left  to  accumulate 149,950,000 

Add  12 J  years'  interest  at  6  per  cent 149,950,000 

299,900,000 
Add  25  per  cent,  to  195  families — i.  e.,  49  families,  and 

deduct  $50,000  for  each  of  the  49 2,450,000 


Left  to  accumulate 297,450,000 

Add  12J  years'  interest  at  6  per  cent. 297,450,000 

594,900,000 
Add  25  per  cent,  to  244  families — i.  e.,  61  families,  and 

deduct  $50,000  for  each  of  the  61 3,050,000 


Left  to  accumulate   591,850,000 

Add  12  J  years'  interest  at  six  per  cent 591,850,000 

1,183,700,000 
Add  25  per  cent,  to  305  families— i.  e.,  76  families,  and 

deduct  $50,000  for  each  of  the  76 3,800,000 


Left  to  accumulate *. 1,179,900,000 

Add  12J  years'  interest  at  six  per  cent 1,179,900,000 

2,359,800,000 
Add  25  per  cent,  to  381  families — i.  e.,  95  families,  and 

deduct  $50,000  for  each  of  the  95 4,750,000 


Left  to  accumulate  2,355,050,000 

Add  1 2  J  years'  interest  at  6  per  cent 2,355,050,000 

4,710,100,000 
Add  25  per  cent,  to  476  families— i.  e.,  119  families,  and 

deduct  $50f)00  for  each  of  the  119 5,950,000 


Left  to  accumulate   4,704,150,000 

Add  12.}  years'  interest  at  6  per  cent 4,704,150,000 

9,408,300,000 
Add  25  per  cent,  to  595  families — t.  e.,  149  families,  and 

deduct  $50,000  for  each  of  the  149 7,450,000 

Left  to  accumulate 9,400,850,000 


104:  THE    WEALTH   OF   CITIES. 

Left  to  accumulate  (brought  forward) $9,400,850,000 

Add  12J  years'  interest  at  6  per  cent $9,400,850,000 

18,801,700,000 
Add  25  per  cent,  to  744   families— i.  e.,  186  families, 

and  deduct  $50,000  for  each  of  the  186 9,300,000 


Left  to  accumulate 18,792,400,000 

Add  12£  years'1  interest  at  6  per  cent 18,792,400,000 

37,584,800,000 
Add  25  per  cent,  to  930  families—  i.  e.,  233  families, 

and  deduct  $50,000  for  each  of  the  233 11,650,000 

Left  to  accumulate 37,573,150,000 

Add  12 J  years'  interest  at  6  per  cent 37,573,150,000 

75,146,300,000 
Add  25  per  cent,  to  1,163  families — i.  e.,  291  families, 

and  deduct  $50,000  for  each  for  the  291 14,550,000 

Left  to  accumulate  ..  ..  .$75,131,750,000 


Add  the  two  hundred  and  ninety-one  families  to  the 
eleven  hundred  and  sixty-three,  and  their  sum  is  a  thou- 
sand four  hundred  and  fifty-four,  which  is  the  increase 
of  the  one  hundred  families,  by  the  addition  of  twenty- 
five  per  cent,  every  twelve  and  a  half  years.  The  cal- 
culation is  continued  for  a  hundred  and  fifty  years,  or 
for  five  generations  of  thirty  years  each.  The  sum  of 
$50,000  is  assigned  to  each  family,  which,  loaned  at  six 
per  cent.,  secures  to  each  a  yearly  income  of  $3,000. 
Each  family  has  an  income  of  ten  dollars  per  day  for 
three  hundred  days  in  the  year.  If  each  family  average 
five  individuals,  each  man,  woman  and  child  receives  an 
income. of  two  dollars  per  day.  This  is  twice  as  much 
as  a  laborer  can  earn  in  a  day,  and  the  single  dollar  must 
support  both  himself  and  his  family.  Besides  this  yearly 
income,  the  people  of  this  nation  would  owe  the  fourteen 
hundred  and  fifty-four  families  $75,131,750,000.  Suppose 
this-  sum  to  be  equally  divided  among  the  families,  each 


THE   WEALTH   OF    CITIES.  105 

would  have  $51,672,455.  The  interest  upon  the  sum 
total,  at  the  rate  of  six  per  cent.,  would  amount  to  more 
than  14,500,000,000  annually.  An  immense  amount  of 
the  products  of  labor  must  be  yearly  sold  for  money  to 
pay  this  interest.  Is  the  law  which  thus  accumulates 
interest  or  products,  a  power  for  actual  production  ? 
No — the  law  which  exacts  this  interest  does  not  increase 
the  quantity  of  money,  nor  of  products  ;  it  simply  re- 
quires that  the  proceeds  of  $4,500,000,000  worth  of 
products  shall  be  given  over  to  the  fourteen  hundred  and 
fifty-four  families  to  satisfy  the  interest.  More  than  half 
the  present  valuation  of  the  whole  property  of  the 
United  States,  both  real  and  personal,  would  be  required 
to  pay  the  interest  for  one  year.  And  yet  these  families 
exact  less  than  our  laws  permit,  for  they  take  but  six  per 
cent,  interest,  and  in  a  number  of  our  States,  the  legal 
rate  is  seven  or  eight  per  cent. 

Now  let  one  per  cent,  be  the  legal  rate  of  interest ; 
and  suppose  the  families  to  loan  the  twenty  millions  for 
the  same  period  of  a  hundred  and  fifty  years  at  one  per 
cent.,  instead  of  at  six  per  cent.,  and  to  collect  and  reloan 
the  interest  half  yearly.  The  people  have  the  same 
amount  of  money  to  use ;  and  at  the  expiration  of  the 
hundred  and  fifty  years,  the  sum  of  the  principal  and 
interest  does  not  exceed  $90,000,000,  while  at  six  per 
cent,  it  amounts  to  $75,131,750,000.  At  one  per  cent., 
the  principal  and  the  interest  do  not  amount  to  one 
eight-hundredth  part  as  much  as  at  six  per  cent.,  nor  does 
the  sum  require  one  eight-hundredth  part  as  much  labor 
to  pay  it.  If  the  people  borrow  the  money  at  six  per 
cent.,  at  the  end  of  six  months  they  give  back  a  portion 
of  the  borrowed  money  to  pay  the  interest.  The  in- 
terest is  reloaned  to  them,  and  thus  continually  increases 
their  indebtedness.  With  interest  at  one  per  cent.,  the 
people  would  have  the  same  quantity  of  money,  and  at 
the  end  of  six  months  would  give  back  a  half  per  cent. 
5* 


106  THE  -WEALTH   OF   CITIES. 

to  pay  the  interest,  and  the  families  would  reloan  the  half 
per  cent,  to  the  people,  instead  of  reloaning  the  three  per 
cent.  A  high  rate  of  interest  cannot  increase  the  quan- 
tity of  money,  but  it  increases  the  indebtedness  of  the 
people. 

If  interest  were  at  one  per  cent.,  each  of  the  one  hun- 
dred families  would  have  but  $2,500  income  on  its 
whole  capital ;  and  if  they  should  continue  to  expend 
$3,000  apiece  yearly,  each  family,  in  order  not  to  encroach 
on  its  original  capital,  would  have  to  produce,  by  its 
labor,  $500  worth  of  products  yearly,  for  its  own  use  or 
for  sale,  instead  of  being  able  to  lay  up  $12,000  yearly, 
without  labor.  The  producing  classes  could  never  be 
oppressed  by  the  capital  of  these  families.  But  with 
interest  at  six  per  cent.,  in  less  than  a  centuiy  and  a  half, 
the  whole  nation  would  be  subject  to  their  control,  be- 
sides being  obliged  to  support  them  and  their  posterity 
in  idleness  during  the  hundred  and  fifty  years.* 

*  It  is  not  reasonable  to  suppose  that  man's  morals  will  be  pure  so 
long  as  we  make  laws  which  deprive  him  of  his  physical  rights.  A 
standard  that  will  deprive  producers  of  what  they  justly  earn,  and 
•  bestow  on  non-producers  what  does  not  belong  to  them,  cannot  fail 
to  corrupt  the  morals  of  both  parties.  No  ingenuity  in  the  invention 
of  machinery,  and  no  physical  force  or  combination  of  labor,  has 
power  to  change  this  wrong  ;  because  the  evil  is  not  in  the  produc- 
tion, but  in  the  wrong  distribution,  which  proceeds  from  the  invisible 
power  or  law  that  governs  it.  For  all  laws  are  spiritual  or  mental 
powers,  which  operate  upon  and  affect  visible  things  ;  and  their  effects 
can  only  be  altered  by  altering  the  spiritual  or  mental  law.  This 
power  of  money  is  not  the  product  of  labor,  nor  even  a  visible  thing, 
more  than  the  attractive  power  of  the  magnet  is  visible.  Money, 
whether  of  gold,  silver  or  paper,  is  visible,  but  the  power  of  interest 
is  invisible,  and  yet  gathers  to  itself  things  visible  as  metals  are 
attracted  to  a  magnet. 


INTEREST   RECEIVED   IN   NEW    YORK.  107 


SECTION  III. 

INTEREST    RECEIVED     BY    THE    CITIZENS    OF   THE    CITY    OF 
NEW   YORK   ON   LOANS   TO   THE   COUNTRY. 

Doubtless  the  city  of  New  York  has  at  this  time  more 
than  $50,000,000,  and  probably  more  than  $100,000,000 
lent  in  various  ways  to  the  country  at  six  or  seven  per 
cent,  interest.  Some  part  of  it  is  invested  in  State  bonds, 
bank  and  railroad  stocks,  stocks  of  manufacturing  compa- 
nies, etc. ;  and  some  lent  on  bond  and  mortgage,  the  divi- 
dends or  interest  on  all  of  which  must  be  paid  in  New 
York.  Estimate  this  sum  at  only  $25,000,000,  and  allow 
it  to  draw  seven  per  cent,  interest.  Suppose  the  citizens 
to  support  themselves  independently  of  the  income  from 
this  loan,  and  allow  it,  by  collecting  and  lending  the 
interest  half  yearly,  to  accumulate  for  a  century.  It 
matters  not  in  what  way  the  capital  may  be  lent,  pro- 
ducers are  compelled  to  add  all  the  interest  from  the 
proceeds  of  their  products.  In  ten  years  and  one  month 
the  $25,000,000,  will  increase  to  $50,000,000;  in  twenty 
years  and  two  months,  to  $100,000,000  ;  in  thirty  years 
and  three  months,  to  $200,000,000  ;  in  forty  years  and 
four  months,  to  $400,000,000  ;  hi  fifty  years  and  five 
months,  to  $800,000,000  ;  in  sixty  years  and  six  months, 
to  $1,600,000,000  ;  in  seventy  years  and  seven  months,  to 
$3,200,000,000  ;  in  eighty  years  and  eight  months,  to 
$6,400,000,000  ;  in  ninety  years  and  nine  months,  to 
$12,800,000,000;  and,  in  one  hundred  years  and  ten 
months,  to  $25,600,000,000.  This  is  as  certain  as  any 
other  mathematical  calculation,  and  nothing  can  prevent 
the  accumulation  of  enormous  sums  in  the  hands  of  a  few 
capitalists  in  this  city,  unless  it  be  the  inability  of  the 
inhabitants  of  the  country  to  pay  the  interest  on  their 
loans.  This  rate  of  interest  compels  farmers  to  give  the 


108  INTEREST   EECEIVED   IN   NEW   YORK 

value  of  one  farm  every  ten  years  for  the  use  of  another ; 
the  tenant  of  each  manufactory  to  give  the  value  of 
another  manufactory,  once  in  the  same  period,  for  the 
uso  of  the  one  occupied  ;  and  the  passengers  and  trans- 
porters upon  each  railroad  and  canal,  to  pay  a  sufficient 
fare  or  freight  to  construct,  at  the  expiration  of  that 
period,  another  railroad  or  canal.  It  is  manifest  that  the 
producing  classes  are  unable  to  fulfil  such  requirements. 
Each  additional  railroad  and  canal  must  be  added  to  the 
original  one  by  the  producing  classes,  and  is  given  to  the 
capitalist  without  labor  or  production  on  his  part.  He 
gains  them  by  the  legal  power  of  money  to  accumulate, 
which  is  equally  great,  whether  the  money  be  lent  on 
interest  or  invested  in  property.  If  farmers,  manufactur- 
ers, mechanics  and  merchants,  were  compelled  to  pay  only 
a  just  rate  of  interest,  they  could  devote  the  labor  now 
expended  in  the  payment  of  high  rates  to  non-producers, 
to  the  supply  of  their  own  wants  and  of  general  comforts 
and  conveniences. 

Large  cities  accumulate  the  wealth  of  nations  without 
earning  it.  According  to  the  State  Register,  in  1845, 
the  city  of  New  York  contained  a  population  of  371,233, 
and  the  State  of  New  York  contained  a  population  of 
2,604,495.  The  population  of  the  city  was  less  than  one- 
seventh  part  that  of  the  State.  And  yet  the  assessed 
valuation  of  the  real  and  personal  property  of  the  city  at 
that  period  was  $239,995,517,  while  all  the  other  property 
in  the  State  was  valued  at  only  $365,650,574.  This  esti- 
mate does  not  include  Brooklyn  and  Williamsburgh, 
which  are  in  fact  parts  of  the  city  of  New  York,  as  they 
have  grown  up  and  are  sustained  by  its  business.  Tak- 
ing the  city  of  New  York  alone,  it  appears  that  it  owns 
more  than  two-fifths  of  the  assessed  property  in  the  State, 
while  it  contains  less  than  one-seventh  of  the  State  popu- 
lation. But  it  is  doubtless  true  that  its  citizens  are  worth 
more  than  all  the  other  inhabitants  of  the  State.  They 


-ON   LOANS   TO   THE   COUNTRY.  109 

own  large  tracts  of  land  in  different  parts  of  the  State, 
and  these  lands  are  taxed  in  the  counties  in  which  they 
are  located.  If  these  taxes  were  estimated  as  being  paid 
in  the  city,  where  the  property  is  owned,  and  were  taken 
from  the  taxes  of  the  country,  the  transfer  of  taxes  on 
the  amount  of  $62,827,530,  would  make  the  valuation  of 
the  property  of  the  city  equal  one-half  the  property  of  the 
whole  State.  The  citizens  of  the  city  of  New  York  own 
large  tracts  of  land  in  other  States,  which  are  taxed  in 
those  States.  They  have  also  a  large  amount  of  money 
lent  to  the  country  on  bond  and  mortgage,  and  large 
amounts  invested  in  United  States,  State,  and  bank 
stocks,  and  in  stocks  of  manufacturing  and  railroad  com- 
panies, etc.,  in  various  States,  all  of  which  property,  if 
taxed,  is  estimated  and  taxed  as  belonging  to  the  country. 
There  are  doubtless  many  loans  of  money  and  much  per- 
sonal property,  which,  although  lent  and  used  in  the  city, 
escape  any  taxation.  The  people  of  other  parts  of  the 
State  own  a  considerable  amount  of  property,  stocks,  etc., 
in  the  city ;  but  the  amount  owned  by  them  in  the  city 
is  very  small  compared  with  the  amount  owned  by  the 
citizens  of  the  city  in  the  country — probably  not  one- 
twentieth.  It  is  reasonable  to  conclude  that  the  inhabi- 
tants of  the  city  and  county  of  New  York  own  a£  much, 
or  even  more  property,  than  all  the  people  in  all  the  other 
fifty-eight  counties  in  the  State.*  Does  any  one  suppose 

*  If,  to  show  the  relative  gain  in  wealth  of  the  city  and  the  State, 
from  184n  to  1859,  we  include  with  the  county  of  New  York  the  neigh- 
boring counties  of  Kings  and  Westchester — which  are,  in  fact,  suburbs 
of  the  city  of  New  York— we  have  the  following  result : 

Assessed  value  of  real  and  personal  property. 

COUNTY.  1845.  1869. 

New  York,         ....     $239,995,517  $552,008,742 

Kings,  .  30,750,472  106,914,629 

Westchester,      ....         10,036,317  40,487,671 

~  280.782.806  699411,042 

Other  Counties,        .        .        .       324.663,7S9  716,879,795 

Total  State  Valuation,  $005,646,1 95  $1,416,290,837 


110  INTEREST   RECEIVED   IN   NEW   YORK. 

that  the  citizens  of  this  city  earn  more  by  their  labor 
than  all  the  other  inhabitants  of  the  State?  Do  they  do 
more  toward  supplying  the  people  of  the  State  with  food, 
clothing,  building  materials,  etc.,  than  the  people  of  the 
State  do  toward  supplying  them  with  these  things  ?  If 
they  do  not,  why  should  they  possess  and  continue  to 
accumulate  so  great  a  proportion  of  the  wealth  ? 

The  means  of  arriving  at  the  truth  in  relation  to  this, 
would  be  to  take  for  a  series  of  years  an  exact  account 
of  all  the  products  which  are  sent  out  of  the  city,  and 
see  if  the  products  that  leave  the  city  are  increased 
above,  or  diminished  below  the  products  that  are  sent 
from  the  country  into  the  city.  If  the  money  be  taken 
into  account,  the  interest  and  dividends  on  both  sides 
should  be  excluded.  Allowance  should  be  made  for  the 
labor  performed  in  exchanging  goods,  in  shipments,  etc., 
in  the  city,  equal  to  the  allowance  for  the  same  amount  of 
labor  on  a  farm,  so  that  the  population  of  the  city  should 
be  fairly  compensated  for  their  labor.  If  it  be  found  that 
the  371,233  citizens  of  the  city  have  not  performed  one-half 
the  labor  for  the  2,604,495  inhabitants  of  the  State,  and 
yet  have  obtained  more  than  one-half  the  whole  property, 
it  is  evident  the  distribution  has  been  unjust.  Our  pro- 
ducers are  continually  endeavoring  to  overcome  their 
poverty  by  their  industry,  but  while  our  present  rates  of 
interest  prevail,  capital  will  continue  to  take  their  surplus 
earnings,  and  leave  them  poor. 


It  appears  that,  in  1845,  these  three  counties  owned  46  J-  per  cent,  of 
the  wealth  in  the  State,  and,  in  1859,  they  owned  49J  per  cent.  But, 
unquestionably,  their  actual  proportion  of  the  wealth  was  far  greater 
than  is  shown  in  the  statistics ;  for  their  citizens  own  very  large 
amounts  of  real  estate  and  other  property  beyond  the  limits  of  these 
counties.  The  property,  too,  of  many  persons  whose  wealth  was 
acquired  in  the  city,  and  who  have  removed  their  residences  beyond 
the  counties  named,  might  properly  be  included  in  this  calculation  as 
belonging  to  the  city. — [En.] 


INCREASE   OF   STATE   VALUATIONS. 


Ill 


SECTION    IV. 

THE  PER  CENTAGE  ACTUAL  INCREASE  OF  THE  VALUE  OF 
THE  PROPERTY  OF  THE  STATES  OF  NEW  YORK  AND 
MASSACHUSETTS,  COMPARED  WITH  THB  PER  CENTAGE 
LEGAL  INCREASE  ON  THE  PROPERTY  OF  THESE  STATES 
FOR  THE  SAME  PERIODSS. 

The  State  of  New  York  is  deemed  very  prosperous, 
and  thought  to  be  rapidly  increasing  in  wealth  by  its  in- 
dustry and  enterprise.  The  following  table,  taken  from 
the  New  York  State  Register  for  1846,  will  exhibit  the 
actual  gain  of  the  people  of  the  State  for  ten  years,  viz, 
from  1835  to  1845,  according  to  the  assessed  value  of  the 
property : 

TABLE 


Or    REAL     AND    PERSONAL    ESTATE    IN    THE    STATE    OP     NEW    YORK,    AS 
TAKEN  -FROM    THE    STATE    REGISTER    FOR    1846. 


Real  estate. 

1835 $403,166,094 

1836 539,756,874 

1837 498,430,054 

1838 502,864,006 

1839  519,058,782 

1840 517,723,170 

1841 531,987,886 

1842 504,254,029 

1843 476,999,430 

1844 480,027,609 

1845 486,490,121 


Personal  estate. 
$128,526,103 
132  615  613 

Corrected  aggregate 
valuation. 

$530,653,524 

122  021  033 

124,680,778 

131  602  988 

121  447  830 

123  311  644 

116,595,233 

118  602  064 

119  612  343 

115,988,895 

605,646,095 

$74,992,571 


112  INCREASE   OF    STATE   VALUATIONS 

The  table  shows  that  in  1835,  the  whole  valuation  of 
the  taxed  real  and  personal  estate  in  the  State  of  New 
York,  was  $530,653,524 ;  and  that  in  1845,  it  had  increased 
to  $605,646,095.  In  the  ten  years,  the  people  of  the 
State  added  to  their  wealth  $74,992,571 — equal  to 
$7,499,257  a  year,  or  a  fraction  over  one  and  four-tenths 
per  cent,  a  year  on  the  capital  employed.  This  calcula- 
tion is  made  without  any  payment  of  interest  until  the 
expiration  of  the  ten  years. 

Taking  the  above  as  a  fair  valuation  of  the  property, 
the  people  of  the  State  added  only  about  one  and  four- 
tenths  per  cent,  per  annum  to  their  capital,  and  the  legal 
interest  of  the  State  is  seven  per  cent.,  and  is  usually  paid 
oftener  than  yearly.  If  we  had  rented  the  State  of  a 
foreign  nation,  and  at  the  end  of  every  six  months  had 
taken  up  our  obligations  and  added  in  the  six  months' 
interest,  at  the  end  of  the  ten  years  we  should  have 
added  to  the  principal  over  $524,000,000.  We  should 
have  owed  the  foreign  nation,  in  interest  or  rent,  a  sum 
seven  times  greater  than  all  that  we  earned  above  our  own 
support.  If  we  earned  only  $74,992,571  more  than  our 
own  maintenance,  how  could  we  return  the  property  to  its 
owners,  and  pay  them  $524,000,000  of  rent,  or  seven 
times  more  than  our  labor  would  have  produced  ?  Yet 
the  laws  of  the  State,  fixing  the  interest  at  seven  per 
cent.,  make  a  requisition  equal  to  this  upon  laborers  hi 
favor  of  capital. 


COMPARED   WITH   LEGAL   INTEREST.  113 

The  average  of  the  yearly  loans  of  the  banks  in  the  State 
of  New  York,  according  to  their  own  reports,  amounts 

to $70,000,000 

According  to  the  annual  report,  the  debt  of  the  State  on 

the  30th  September,  1846,  was 24,734,080 

Debts  of  the  principal  cities  in  the  State  in  1845,  as  taken 
from  the  State  Register  : 

City  of  New  York $14,476,986 

"     Brooklyn... 545,000 

"     Albany 500,000 

"     Troy/. 772,000 

"     Rochester 108,000 

"    Buffalo...  57,131 

16,459,117 

$111,193,197 

The  interest  on  this  sum  at  7  per  cent,  per  annum 7,783,523 

Yearly  average  of  the  surplus  earnings  of  the  people  of 
the  State,  according  to  the  assessed  valuation  of  the 
property,  from  1835  to  1845 7,499,257 

$284,266 

It  appears  that  the  interest  on  these  debts  alone,  at 
seven  per  cent,  would  amount  to  $284,266  more  than  the 
surplus  earnings  of  all  the  people  in  the  State,  and  this 
too  without  compounding  the  interest.  It  must  be  borne 
in  mind,  that  this  debt  of  $111,193,197  is  contracted  for 
money  borrowed  by  the  people,  or  by  the  State,  and  the 
interest  paid  upon  it  goes  into  the  hands  of  a  few  capital- 
ists, who  furnish  the  capital  for  banking,  and  lend  the 
money  to  the  State  and  its  incorporated  cities.  All  the 
debts  contracted  by  the  sale  of  lands,  agricultural  pro- 
ducts, and  merchandise — all  the  money  lent  by  individ- 
uals on  bond  and  mortgage,  and  all  business  debts,  bear- 
ing interest,  are  additional  to  the  reported  debts.  The 
debts  yearly  contracted  in  the  State  by  sales  of  land, 
merchandise  etc.,  amount  to  several  hundred  millions  of 
dollars,  and  two,  three,  or  four  hundred  millions  bear 
interest.  Must  not  the  payment  of  so  great  an  amount 
of  interest,  by  the  producers,  concentrate  the  wealth  of 


114  INCREASE   OF   STATE   VALUATIONS 

the  State  in  the  hands  of  a  few  capitalists,  and  continue 
more  and  more  to  oppress  the  producers  ?  "We  might 
as  well  expect  by  labor  to  dam  up  the  mouths  of  our 
rivers,  so  that  they  could  not  empty  into  the  ocean,  as  to 
expect  by  labor,  to  contend  successfully  against  the 
power  of  capital,  even  at  two  and  a  half  per  cent,  interest, 
and  much  less  against  six  or  seven  per  cent.  An  inter- 
est on  capital  of  even  two  and  a  half  per  cent,  per  annum 
would  as  certainly  break  down  productive  industry,  and 
accumulate  the  wealth  in  favor  of  capital,  as  the  rivers 
would  certainly  break  down  the  dams,  and  force  their 
waters  and  the  obstructing  dams  into  the  ocean. 

According  to  the  assessed  valuation  of  the  property  of 
the  State  of  New  York,  the  increase  of  its  wealth  from 
1835  to  1845  was  about  one  and  four-tenths  per  cent,  per 
annum,  without  compounding  the  interest.  This  was  a 
period  of  only  ten  years.  It  is  probable  that,  in  ]  835, 
property  was  estimated  higher  in  proportion  to  its  actual 
worth  than  in  1845.  This  statement,  then,  would  not  be 
an  exactly  fair  criterion  of  the  actual  increase  of  wealth 
in  the  State.  During  that  period,  according  to  it,  we 
gained,  beside  our  own  support,  only  a  fraction  over  one 
per  cent,  a  year  by  all  our  labor.  If  this  was  a  correct 
estimate,  the  per  centage  we  gained  hi  wealth  was  only 
three-fourths  as  great  as  our  per  centage  increase  in  pop- 
ulation, for,  during  the  ten  years,  our  population  increased 
from  2,174,517  to  2,604,495,  or  a  fraction  less  than  two 
per  cent,  a  year.  This  calculation  would  make  the  aggre- 
gate wealth  of  the  State  in  proportion  to  its  population 
less  in  1845  than  it  was  in  1835  ;  and  this,  we  presunle, 
was  not  the  fact.  Still  there  is  little  doubt  that  at  least 
one-half  the  people  of  the  State  were  poorer  in  1815,  and 
are  now  poorer,  than  they  were  in  1835.  The  increased 
wealth  is  accumulated  in  fewer  hands.  More  and  more 
of  the  earnings  of  the  producing  classes  are  required  to 
pay  the  yearly  rent,  or  interest,  on  the  yearly  increasing 
capital.  If  the  men  who  are  now  rich  had  in  1835  an  in- 


COMPARED   WITH- LEGAL   INTEREST.  115 

come  that  abundantly  supplied  their  wants,  an  increase  of 
wealth  has  not  added  to  their  happiness  ;  and  the  increase 
has  been  taken  from  those  who  toil,  and  yet  are  suffering 
for  the  necessaries  of  life.  Without  improving  the  con- 
dition of  the  rich,  we  are  continually  doing  a  wrong  to  a 
large  class  of  industrious  and  worthy  citizens.* 

*  In  1859,  the  valuation  of  the  real  and  personal  property  in  the 
State  of  New  York  had  increased  to  $1,416,290,837,  showing  an 
increase  in  fourteen  years  of  $810,644,742,  or  less  than  seven  per 
cent,  added  annually.  But  property  was  probably  estimated  lower  in 
proportion  to  its  value  in  1845  than  it  was  in  183.i  or  1859,  and  a 
calculation  embracing  the  twenty-four  years,  would  give  a  truer 
criterion  of  the  actual  increase  of  wealth.  The  property  of  the 
State  in  1835  was  valued  at  $530,653,524,  and  the  increase  in  twenty- 
four  years  was  $885,637,313,  or  for  the  whole  period  an  average  of 
not  quite  seven  per  cent,  per  annum  ;  and,  added  yearly,  of  about 
four  per  cent,  per  annum.  At  seven  per  cent.,  with  the  interest  com- 
pounded yearly,  the  State  would  have  added  to  its  wealth  during  the 
twenty  four  years,  over  $2,100,000,000,  that  is,  over  $1,200,000,000 
more  than  was  actually  added  to  the  wealth  of  the  State  by  the  labor 
of  all  its  inhabitants.  The  legal  rate  of  interest  demanded  from 
laborers  over  $1,200,000,000  more  than  they  actually  earned.  Of 
course,  as  a  body,  they  could  have  had  only  a  bare  subsistence,  and 
large  numbers  of  them  must  have  been  reduced  to  the  condition  of 
paupers.  The  following  extracts  are  taken  from  the  Report  of  the 
New  York  Association  for  improving  the  Condition  of  the  Poor,  for 
the  year  1859.  James  Brown,  President;  James  Boorman,  James 
Lenox,  Horatio  Allen,  A.  R.  Wetmore,  John  C.  Green,  Vice  Presi- 
dents. 

"  It  was  shown  in  the  Thirteenth  Annual  Report  of  this  Association, 
that,  according  to  the  ratios  of  population  in  the  two  countries 
there  were  about  two  paupers  in  the  wealthy  and  prosperous  State  of 
New  York,  to  one  in  Ireland,  whose  very  name  has  long  been  a  syn- 
onym for  poverty  and  wretchedness.  The  statement  appeared  so 
improbable,  that  it  was  received  with  a  general  expression  of 
incredulity.  Since  that  period,  pauperism  appears  to  have  augmented 
more  rapidly  in  our  own  State  than  it  has  decreased  in  Ireland.  If 
any  reliance,  therefore,  is  to  be  placed  in  Governmental  Reports,  that 
unwelcome  fact,  so  humiliating  to  our  pride,  having  been  confirmed 
by  the  statistics  of  each  succeeding  year,  can ,  with  no  show  of  rea- 


116  INCREASE   OF   STATE    VALUATIONS 

An  estimate  of  the  increase  of  wealth  in  the  State  of 
Massachusetts,  for  fifty  years,  is  contained  in  an  article  in 
the  May  number,  for  1847,  of  that  deservedly  celebrated 

son,  be  longer  dented  or  evaded.  The  Annual  Report  of  the 
Secretary  of  the  State  of  New  York,  to  the  Legislature,  of  the 
paupers  relieved  in  the  several  counties,  at  the  public  expense,  during 
the  past  year,  affords  a  basis  for  a  comparison  of  our  own  pauperism 
with  that  in  Great  Britain  and  Ireland,  for  the  same  period,  of  which 
the  following  is  the  result : 

Population.  Paupers. 

England  and  Wales 19,045,000  885,000 

Scotland 8,035,000  115,218 

Ireland 6,500,000  56,910 

New  York  State 8,500,000  261,155 

*'  In  other  words,  the  pauperism  of  England  and  Wales  was  in  the 
ratio  of  four  and  six-tenths  per  cent,  of  the  whole  population  ;  in 
Scotland,  three  and  nine-tenths  per  cent.  ;  in  Ireland,  about  nine- tenths 
of  one  per  cent. ;  while  in  the  great  State  of  New  York,  which  is  fore- 
most in  population,  enterprise  and  resources,  the  ratio  is  seven  and 
four-tenths  per  cent.  Making,  therefore,  every  reasonable  allowance 
for  hypothetical  inaccuracies  in  our  State  Statistics — for  the  figures 
assumed  are  less  than  the  returns  would  justify — and  we  are  con- 
fronted with  the  appalling  fact,  that  the  pauperism  in  this  State  is 
some  five  per  cent,  in  advance  of  that  in  Ireland ;  that  is  to  say, 
there  are,  according  to  the  ratios  of  population,  five  paupers  in  this 
State  to  one  in  that  country.  It  is  unnecessary  to  extend  the  con- 
trast, or  it  might  be  farther  shown,  that  the  legal  provision  for  the 
relief  of  the  New  York  paupers  is  greater  per  capita,  than  the  govern- 
mental allowance  in  Ireland,  but  proportionately  less  than  the  poor 
rates  both  of  England  and  Scotland. 

"  Let  it  not  be  supposed  that  this  dread  phenomenon  of  pauperism 
has  come  suddenly  upon  us.  Statistics,  on  the  contrary,  show  that  it 
has  reached  its  alarming  prevalence  by  a  steady,  gradual  growth. 
The  census  of  the  State  from  1831  to  1851,  and  the  pauper  statistics 
for  the  same  period,  exhibit  the  following  results  : 

Increase  of  population  in  20  years 61  per  cent. 

Increase  of  pauperism  from  annual  tables  during  the 

game  period T06  per  cent 

"  'In  1831,  there  was  one  pauper  to  every  123  persons  :  in  1841, 


COMPARED   WITH   LEGAL   INTEREST.  117 

periodical,  Hunt's  Merchants'  Magazine.  A  few  extracts 
are  made  to  show  the  difference  between  the  amount  of 
property  produced  by  the  labor  of  Massachusetts  during 


there  was  one  to  every  39  persons ;  in  1851,  there  was  one  to  every 
24  persons;  and  this  year  (1856),  there  is  one  to  every  17  persons. 
Let  the  same  ratio  continue  15  years  longer,  and  there  will  be  one 
pauper  to  every  five  persons  ;  that  is,  every  five  persons  in  the  State 
must  support  one  pauper.  Twenty  years,  reaching  from  January, 
1831,  to  1851,  furnish  as  just  a  scale  as  can  be  obtained,  by  which  to 
gauge  the  succeeding  20  years.  Indeed,  the  five  years  since  1851 
show  a  still  larger  increase  in  the  ratio  of  pauperism,  so  that  at  the 
end  of  15  years  more,  the  20  years  from  1851  to  1871  would  exhibit 
even  a  sadder  result  than  the  number  of  years  between  1S31  and 
1851.  It  is  submitted,  whether  we  should  act  from  a  blind  confidence 
in  the  perpetuity  of  our  institutions,  or  from  statistics  gathered  from 
the  steady  action  of  a  quarter  of  a  century,  on  our  history.' 

"Since  1856,  when  the  above  statement  in  substance  was  first  pub- 
lished, pauperism  has  increased  in  the  State  above  the  ratio  then  an- 
ticipated, so  that  the  present  proportion  to  the  population  is  one 
pauper  to  about  13J  persons.  Is  it  not  astonishing  that  such  facts 
are  unheeded  ?  It  is  idle  to  reason  against  facts,  for  if  there  is  any 
reliability  in  statistics,  the  facts  themselves  stand  boldly  in  evidence. 

"Ireland  and  other  foreign  countries  have  doubtless  been  benefited 
at  our  expense,  by  the  deportation  of  their  poor,  and  to  them  we 
owe  the  bulk  of  our  pauperism 

"But,  in  conceding  this,  let  not  the  momentous  fact  be  overlooked, 
that  pauperism,  so  long  regarded  as  an  exotic,  is  actually  germinating 
in  our  own  soil,  with  baneful  luxuriance.  The  humilating  proof  of 
this  is  placed  beyond  dispute  by  official  statistics.  Of  the  130,150 
paupers  relieved  in  this  city,  in  1858,  50,251,  or  38  per  cent.,  were 
natives ;  and  that  this  result  was  not  attributable  to  the  demoralizing 
influeucies  of  city  life,  is  shown  by  the  fact  that,  of  the  261,155 
State  paupers,  104,744,  or  41  per  cent.,  of  the  whole  number,  were 
natives  of  the  United  States.  It  is  evident,  therefore,  that  exclusive 
of  emigration,  the  ratio  of  our  native-born  paupers  to  the  population 
of  our  city  and  State  is  far  beyond  that  of  England  and  more  than 
double  that  of  Ireland 

"  It  is  the  certain  tendency  of  every  financial  revulsion,  to  throw 
multitudes  of  the  self-supporting,  industrious  classes  down  to  a  lower 
level  than  they  before  occupied.  Nay,  in  the  ordinary  annual  opera- 


118  INCREASE    OF   STATE    VALUATIONS 

fifty  years,  and  the  amount  which  would  have  accumu- 
lated upon  the  capital  employed  during  that  period  at  six 
per  cent,  interest. 

"  It  is  the  object  of  this  article  to  exhibit  the  progress 
of  wealth  in  Massachusetts  during  the  fifty  years,  from 
1V90  to  1840,  as  deduced  from  the  six  State  valuations, 
taken  at  intervals  of  ten  years  each.  These  valuations 
have  the  legislative  sanction  of  the  General  Court,  and 
are  the  bases  of  apportionment  of  all  State  taxation  for 
the  ten  years  following.  They  are  prepared  from  the 
returns  furnished  by  the  assessors  of  the  several  towns 
and  districts,  and  are  intended  to  embrace  all  the  taxa- 
ble property  of  the  Commonwealth.  They  may  be  re- 
lied upon  as  sufficiently  correct  for  the  purposes  of 
comparison,  or  of  showing  the  progress  of  wealth  during 
these  fifty  years  ;  at  least  they  furnish  the  nearest  approx- 
imation we  have  to  the  true  amount  of  wealth  in  the 
State." 

The  assessors'  valuation  of  the  property  in  the  State  of 


tions  of  labor,  as  affected  by  the  seasons,  and  by  the  fluctuations  of 
supply  and  demand  common  in  the  most  prosperous  times,  every 
winter  is  full  of  perils  to  thousands  of  the  respectable  poor.  Such 
being  the  laws  of  labor,  what  schemes  of  economical  science  will 
prevent  their  operation  ? 

"But  the  subject  presents  itself  in  another  aspect.  The  times  are 
always  hard  with  large  families,  whose  miserably  insufficient  wages 
just  keep  them  above  starvation.  By  wonderful  energy  and  manage- 
ment, they  contrive  to  live  on,  unaided,  the  greater  part  of  the  year. 
But  let  them  be  overtaken  with  sickness,  or  by  the  usual  contractions 
of  labor  during  the  winter,  which  takes  away  their  slender  pittance, 
and  what  is  there  between  them  and  starvation  ?  They  have  no 
work,  no  savings  to  fall  back  upon,  and  their  children  and  themselves 
are  perishing  with  cold,  and  hunger,  and  nakedness.  It  is  not  in 
human  nature  to  endure  such  an  ordeal,  unharmed,  especially  when 
driven  by  stern  necessity  to  consort  with  the  outcast,  and  to  be  de- 
graded by  public  relief.  Yet  such,  alas !  is  often  the  condition  of 
many  of  the  deserving  poor." — [Eo.] 


COMPARED    WITH    LKGAL    INTEREST.  119 

Massachusetts  in  1Y90,  was  $44,024,349,  and  in  1840,  it 
had  increased  to  $299,880,388.  The  increase  of  wealth 
in  the  State  during  fifty  years  was  $255,855,989.  In 
Massachusetts  the  legal  rate  of  interest  is  six  per  cent, 
per  annum,  and  the  value  of  property  is  commonly  esti- 
mated by  the  per  centage  income  for  which  it  can  be 
rented.  If  a  house  and  lot,  or  a  store  and  lot,  will  rent 
for  $600  per  annum,  besides  the  taxes  and  insurance,  the 
property  is  valued  at  $10,000,  for  the  income  from  it  is 
equal  to  interest  at  six  per  cent,  per  annum  on  $10,000. 

In  Massachusetts,  the  banks  are  allowed  to  discount 
paper  at  six  per  cent.  In  making  loans,  they  take  the 
interest  or  discount  from  the  notes  for  the  time  they  have 
to  run.  Take  the  value  of  the  property  in  1790,  say 
$44,024,349,  and  suppose  it  to  have  been  loaned  at  six 
per  cent,  per  annum,  on  notes  having  six  months  to  run. 
In  fifty  years  the  interest  on  this  sum  would  have 
amounted  to  $885,524,246.  Add  the  principal — i.  e., 
$44,024,349,  and  we  have  a  sum  of  $929,548,595.  The 
actual  increase  of  wealth  in  the  State  during  the  fifty 
years,  was  but  $255,855,989.  Add  to  this  the_principal 
or  property  of  the  State  in  1790— *.  <?.,  $44,024,349,  and 
the  entire  wealth  of  the  State  amounts  to  $299,880,338  ; 
or  not  one-third  as  much  as  the  accumulation  on  the  same 
capital  would  have  been  in  fifty  years  at  six  per  cent,  in- 
terest per  annum.  If,  in  1790,  the  people  of  Massachu- 
setts had  rented  their  property  of  a  foreign  nation,  and 
agreed  to  pay  interest  on  it  half  yearly  at  the  rate  of  six 
per  cent,  per  annum,  they  would  have  been  bound  to  pay 
in  the  fifty  years,  about  three  and  a  half  times  more  than 
they  earned  during  that  period  over  and  above  their 
living.  The  results  of  the  establishment  of  this  rate  of 
interest  in  the  State,  are  manifest  in  the  accumulation  of 
wealth  in  the  hands  of  the  few,  and  in  the  proportionate 
destitution  of  the  many. 

According   to   a   pamphlet   containing    a  list   of  the 


120  INCREASE   OF   STATE   VALUATIONS. 

wealthy  men  of  Boston,  and  an  estimate  of  the  value  of 
their  property,  there  are  224  individuals  who  are  worth, 
in  the  aggregate,  $71,855,000,  and  upon  an  average, 
$321,781  each.  In  this  pamphlet  no  estimate  is  made  of 
any  individual's  property  that  is  supposed  to  amount  to 
less  than  $100,000.  If  we  take  the  wealthy  men  in  all 
the  other  towns  and  counties  in  the  State,  and  suppose 
that  there  are  3,000  other  individuals  who  are  worth 
only  $30,000  each,  their  aggregate  wealth  would  amount 
to  $90,000,000.  Add  this  sum  to  the  $71,855,000  owned 
by  the  224  men,  and  we  have  $161,855,000,  or  consider- 
ably more  than  half  the  value  of  all  the  property  of  the 
State.  Such  estimates  are  liable  to  be  more  or  less  in- 
correct; but  any  one  who  will  make  an  estimate  of  the 
wealth  of  the  town  or  village  in  which  he  resides,  will 
find  that  a  very  small  proportion  of  the  inhabitants  are 
worth  more  than  all  the  rest.  This  is  still  more  true  of 
large  cities  than  it  is  of  towns  and  villages. 

If  the  estimate  of  the  wealth  of  the  3,224  wealthy  men 
in  the  State  of  Massachusetts  be  correct,  these  men  are 
worth  more  than  all  the  other  inhabitants  of  the  State. 
Allowing  the  families  of  the  3,224  men  to  average  five 
persons  each,  they  would  constitute  a  population  of 
16,120  individuals.  In  1840,  the  State  contained  a  popu- 
lation of  737,700.  The  16,120  individuals  'would  not  be 
two  and  one-fifth  per  cent,  of  the  population,  and  yet 
they  would  own  more  than  half  the  wealth  of  the  State. 
If  this  estimate  even  approach  the  truth,  it  shows  an 
immense  disproportion  of  wealth  for  the  labor  performed 
by  its  owners ;  for  it  is  impossible  that  they,  or  their 
ancestors,  whatever  may  have  been  their  skill  or  industry, 
can  have  performed  the  labor  and  made  the  improve- 
ments which  constitute  this  wealth.  The  interest  on 
money  loaned,  and  the  rent  on  property  leased,  are  the 
only  ineans  by  which  they  could  have  accumulated  it. 
$44,024,349  loaned  on  six  months'  paper  at  six  per  cent. 


NATIONAL   AND    STATE   DEBTS.  121 

interest  per  annum,  as  interest  is  taken  by  banks,  would 
increase  in  fifty  years  to  twenty-one  times  its  original 
amount.  This  increase  would  accrue  to  the  lenders  of 
the  money,  by  merely  exchanging  their  money,  or  bank- 
notes for  the  notes  of  individuals,  and  collecting  the 
interest. 

If  the  rate  of  interest  on  money  in  Massachusetts 
were  at  one  per  cent,  per  annum,  instead  of  at  six  per 
cent.,  and  the  $44,024,349  were  loaned  on  six  months' 
paper  at  one  per  cent,  interest  in  advance,  in  fifty  years 
the  money  would  accumulate  $28,879,973.  Add  the 
principal — i.  e.,  $44,024,349 — and  the  sum  would  be 
$72,904,322,  instead  of  $929,548,595,  the  acqumulation  at 
six  per  cent, 

SECTION  V. 

INTEREST   ON   NATIONAL   AND    STATE   DEBTS. 

Interest  on  money  at  six  per  cent,  per  annum,  payable 
half-yearly,  will  double  the  principal  in  eleven  years, 
eight  months,  and  twenty  days ;  but,  for  convenience, 
we  will  call  it  twelve  years.  One  thousand  dollars  lent 
at  six  per  cent.,  in  twelve  years,  will  accumulate  to 
$2,000 ;  in  twenty-four  years,  to  $4,000 ;  in  thirty-six 
years,  to  $8,000;  in  forty-eight  years,  to  $16,000;  in 
sixty  years,  to  $32,000 ;  in  seventy-two  years,  to  $64,000  ; 
in  eighty-four  years,  to  $128,000  ;  in  ninety-six  years,  to 
$256,000  ;  in  a  hundred  and  eight  years,  to  $512,000  ;  in 
one  hundred  and  twenty  years,  to  $1,024,000,  Multiply 
this  sum  by  1,024,  and  it  will  give  the  accumulation  for 
one  hundred  and  twenty  years  more;  $1,024,000X1,024 
=$1,048,576,000.  Multiply  this  product  by  1,024,  and 
we  shall  have  the  accumulation  during  the  next  one  hun- 
dred and  twenty  years,  or  for  a  period  of  three  hundred 


122  INTEREST   ON    NATIONAL 

and  sixty  years  —  $1,048,576,000  X  1,024  =  $1,073,741, 
824,000. 

A  rate  of  interest  on  money  at  one  per  cent.,  payable 
half-yearly,  will  double  the  principal  in  about  sixty-nine" 
and  a  half  years ;  but,  for  convenience,  we  will  call  it 
seventy  years.  One  thousand  dollars  lent  at  one  per 
cent.,  in  seventy  years  will  accumulate  to  $2,000 ;  in  a 
hundred  and  forty  years,  to  $4,000  ;  in  two  hundred  and 
ten  years,  to  $8,000  ;  in  two  hundred  and  eighty  years, 
to  $16,000  ;  in  three  hundred  and  fifty  years,  to  $32,000  ; 
or  in  three  hundred  and  sixty  years  to,  say,  $37,574. 

Deduct  $37,574  from  the  accumulation  on  $1,000  at 
six  per  cent.,  during  the  three  hundred  and  sixty  years 
— i.  e.,  $37,574  from  $1,073,741,824,000,  and  the  remain- 
der is  $1,073,741,786,426  ;  which  sum,  a  rate  of  interest 
at  six  per  cent,  on  $1,000  will  accumulate  over  and  above 
the  sum  accumulated  by  a  rate  of  interest  of  one  per  cent, 
on  $1000  during  a  period  of  three  hundred  and  sixty 
years.  One  dollar  loaned  at  six  per  cent,  per  annum,  the 
interest  collected  and  reloaned  half-yearly  for  a  period  of 
three  hundred  and  sixty  years,  will  accumulate  the  sum 
of  $1,073,741,824  ;  while  the  same  dollar  loaned  atone 
per  cent.,  and  the  interest  collected  and  reloaned  in  the 
same  manner  for  the  same  period,  will  accumulate  little 
more  than  $37.  One  dollar  loaned  at  six  per  cent,  inter- 
est per  annum  for  a  period  of  three  hundred  and  sixty 
years,  would  accumulate  more  than  the  assessed  value  of 
the  whole  State  of  New  York.  The  legal  interest  in  the 
State  of  New  York  is  seven  per  cent.,  and  one  dollar 
loaned  at  this  rate  for  three  hundred  and  sixty  years, 
would  accumulate  a  greater  sum  than  the  valuation  of 
the  whole  United  States. 

Suppose  a  foreign  nation  should  lend  to  the  government 
of  the  United  States  $100,000  at  seven  per  cent.,  on  con- 
dition that  our  government  should  give  her  bonds  half 
yearly  for  the  payment  of  the  interest,  and  the  sum  should 


AND   STATE   DEBTS.  123 

accumulate  for  a  terra  of  three  hundred  and  sixty  years. 
However  prosperous  our  people  might  be,  at  the  expira- 
tion of  the  period  the  whole  property  of  the  nation  would 
not  pay  the  debt.  At  seven  per  cent,  interest,  the  debt 
would  double  in  about  ten  years.  In  three  hundred  and 
sixty  years,  $100,000  loaned  at  seven  per  cent,  interest 
per  annum  would  amount  to  $6,971,947,673,600,000  ;  a 
much  larger  sum  than  the  valuation  of  the  property  of  the 
whole  world.  These  calculations  make  it  evident  that  six 
and  seven  per  cent,  interest  cannot  and  ought  not  to  be 
paid  by  any  nation. 

We  will  make  a  calculation  of  interest  at  three  pei 
cent,  per  annum,  paid  and  reloaned  half-yearly,  as  in  the 
former  calculations.  If  the  United  States  should  borrow 
from  England  $100,000  at  three  percent,  interest,  take 
up  her  bonds  every  six  months,  and  give  new  bonds, 
adding  in  the  interest,  the  debt  would  be  doubled  in 
about  twenty-three  and  a  half  years.  But  allow  it  to 
double  in  twenty-four  years,  and  the  $100,000  would  accu- 
mulate in  three  hundred  and  sixty  years,  to  $3,276,800,000. 
The  annual  interest  on  this  sum  at  three  per  cent,  would 
be  $98,304,000.  The  yearly  payment  of  this  slim  of  in- 
terest would  be  caused  by  merely  borrowing  $100,000 
for  a  period  of  three  hundred  and  sixty  years  at  three 
per  cent,  per  annum,  adding  the  interest  every  six 
months.  This  enormous  debt  would  be  occasioned  by 
the  accumulative  power  of  interest,  which  it  requires  the 
products  of  labor  to  satisfy  and  pay. 

Suppose,  when  Virginia  was  settled  in  1607,  England 
had  sold  to  the  first  settlers  the  whole  of  the  United 
States  for  $1,000,  and  had  taken  a  mortgage  for  this  sum 
covering  the  whole  property,  but  instead  of  paying  the 
interest  yearly  at  seven  per  cent,  the  settlers  had  agreed 
to  take  up  their  bonds  at  the  end  of  every  six  months, 
and  add  in  the  interest.  Allow  the  $1,000  and  (lie 
accruing  interest  to  remain  outstanding  until  1860,  and 


124  INTEREST   ON    NATIONAL 

then  become  due.  Although  our  prosperity  has  far 
surpassed  that  of  any  other  nation,  yet  our  property  of 
every  description  would  not  pay  the  debt.  Interest  at 
seven  per  cent,  doubles  the  principal  in  ten  years  and  one 
month.  In  one  hundred  years  and  ten  months  the  debt 
would  have  amounted  to  $1,024,000 ;  and  in  two  hundred 
and  one  years  and  eight  months,  to  $1,048,576,000.  Add 
fifty  years  and  five  months  to  1859,  and  the  sum  would 
amount  to  $33,554,432,000.  All  the  interest  which  would 
have  accumulated  upon  the  $1,000  would  not  have  in- 
creased the  quantity  of  money  or  the  property  of  the  nation. 
All  the  increase  of  the  value  of  the  property  would  have 
been  added  by  the  labor  of  the  people :  but  all  their  sur- 
plus earnings  have  not  equalled  the  legal  accumulation  at 
seven  per  cent,  interest  on  $1,000  during  this  period. 

The  southern  and  western  States  depend  upon  the 
yearly  products  of  their  labor  for  their  wealth ;  they  are 
greatly  impoverished  by  the  amount  of  interest  that  they 
are  compelled  to  pay  to  our  eastern  and  northern  cities 
for  the  use  of  money.  A  very  large  amount  of  the  capi- 
tal stocks  of  western  and  southern  banks,  and  a  large 
amount  of  western  and  southern  State  bonds,  are  owned 
by  capitalists  in  the  northern  cities  and  by  foreigners. 
The  interest  on  these  is  constantly  transferring  the  earn- 
ings of  the  people  of  these  States  to  a  few  capitalists  in  the 
large  cities  and  in  foreign  nations.  All  this  would  be 
avoided  by  the  establishment  of  proper  monetary  laws  by 
our  own  government.  The  government  ought  to  furnish 
money,  by  making  a  representative  of  the  property  of 
applicants  in  their  own  States,  and  no  State  should  be 
compelled  to  pay  to  other  States  or  nations  millions  of 
dollars'  worth  of  products  yearly  for  the  use  of  money  to 
represent  the  value  of  its  own  property.  For  if  there  be 
property  in  any  State  or  country,  there  is  a  founda- 
tion on  which  to  establish  a  plenty  of  good  money  to 
represent  its  value  ;  but  if  there  be  no  property  there 


AND   STATE   DEBTS.  125 

will    be  no   inhabitants ;    and,   of   course,   no   use  for 
money. 

Money  has  been  instituted  with  such  overwhelming 
power,  that  it  is  almost  universally  understood  to  be  the 
actual  capital,  and  the  property  and  labor  of  a  nation 
only  representatives  of  the  value  of  money.  The  news- 
papers and  periodicals  of  the  day  consider  capital  abun- 
dant when  money  is  plenty,  and  lament  the  want  of  capi- 
tal when  money  is  scarce.  New  States  legalize  high 
rates  of  interest  to  inducejcapital,  that  is,  money,  to  come 
into  them  for  investment.  But  the  money  is  not  capital, 
for  if  the  real  capital  did  not  first  exist  in  these  States  in 
sufficient  amount  to  secure  the  money  it  would  never  go 
into  them.  There  could  be  no  use  for  money  in  any  part 
of  the  world  unless  the  capital  first  existed ;  for  there 
would  be  nothing  to  buy,  and  the  money  itself  could 
afford  no  means  of  support,  and  would  therefore  be 
entirely  useless.  But  although  a  new  State  may  have  a 
large  amount  of  capital  and  improvements,  the  inhabitants 
cannot  exchange  their  property  without  money  :  it  is  im 
possible  for  the  people  to  make  their  exchanges  by  barter, 
and  no  States  take  the  products  of  labor  for  taxes  :  all 
debts  are  payable  in  money.  The  people  of  every  State 
must  have  money  for  the  transaction  of  business,  yet 
money  is  not  their  capital,  it  only  represents  the  value  of 
their  capital.  Landed  property  in  any  new  State  that  is 
competent  to  secure  permanently  a  loan  of  $1,000,  made 
by  a  citizen  of  another  State,  and  to  secure  the  payment 
of  the  interest  yearly,  is  just  as  competent  to  secure  per- 
manently a  like  sum  of  paper  money,  if  it  were  created 
by  the  Government  on  purpose  to  make  this  loan.  Where 
actual  capital  exists,  it  would  be  as  easy,  under  true 
monetary  laws,  to  make  all  the  money  necessary  justly 
to  represent  and  exchange  its  value,  as  it  is  to  furnish 
measures  to  determine  the  quantity  of  products ;  and 
there  would  be  no  more  necessity  for  this  nation  to 
depend  upon  England,  or  upon  any  other  foreign  coun- 


126       INCREASE  OF  PROPERTY  BY  LABOR 

try,  to  furnish  us  with  money  to  represent  the  value  of 
our  own  capital,  than  there  is  for  sending  to  the  Czar  of 
Russia  for  some  of  Ms  nobles  to  govern  us. 


SECTION  VI. 

NO  ACCUMULATION  OF  PROPERTY  BY  LABOR  EQUAL  TO  THE 
ACCUMULATION  BY  THE  LOAN  OP  MONEY  AT  SEVEN 
PER  CENT.  INTEREST. 

Although  the  business  of  a  nation  be  conducted  in 
good  faith,  and  all  contracts  be  fulfilled  according  to  law, 
and  no  scarcity  of  money  be  induced,  yet  a  legal  rate  of 
interest  of  seven  per  cent,  per  annum,  wih1  inevitably  con- 
centrate the  wealth  in  a  few  hands. 

To  show  that  interest  at  seven  per  cent,  will  accumu- 
late property  far  more  rapidly  than  it  can  be  earned  by 
labor,  suppose  a  nation  of  one  thousand  individuals.  We 
will  use  this  miniature  nation  in  illustration,  because  the 
operation  of  the  laws  will  be  more  readily  seen  upon  so 
small  a  community ;  but  the  effects  would  be  similar  upon 
a  great  nation.  The  thousand  persons  settle  in  a  new 
country,  and  engage  in  various  occupations,  agricultural, 
manufacturing,  mercantile,  etc.  At  the  settlement 
of  the  colony,  we  will  suppose  the  colonists  to  be  worth 
an  equal  amount  of  property,  so  that  one  shall  possess  no 
superiority  over  another.  Each  pursues  some  lawful  and 
useful  business,  without  entering  into  any  speculation 
whereby  a  fortune  may  be  gained  without  labor.  No 
one  has  any  means  of  support  besides  actual  production, 
except  the  legal  interest  of  seven  per  cent,  on  money 
loaned,  or  rent  at  the  same  rate  on  money  invested  in 
property.  All  are  diligent  in  their  several  occupations, 
and  thus  each  contributes  to  the  general  well-being. 

Two  mechanics,  just  come  of  age,  are  desirous  of  accu- 
mulating large  fortunes.  They  are  good  workmen,  and 
each  is  able  to  earn  a  dollar  a  day  over  and  above  his  ex- 


COMPARED   WITH    LEGAL    INTEREST. 


127 


penses.  Every  six  months  they  loan  the  money  thus 
earned  at  seven  per  cent,  interest,  the  interest  payable 
half  yearly.  They  set  their  affections  upon  being  rich, 
and  therefore  do  not  burden  themselves  with  a  house  and 
family.  These  men  earn  an  average  of  a  dollar  a  day, 
beside  their  expenses,  three  hundred  days  in  each  year, 
during  forty  years  and  four  months.  Their  age  is  then, 
sixty-one  years  and  four  months.  Each  earns  by  labor  $300 
per  year  for  forty  years,  or,  for  the  whole  period,  $12,100 
— together,  $24,200.  The  interest  on  their  earnings, 
loaned  half  yearly,  for  a  period  of  forty  years  and  four 
months,  accumulates  an  amount  which  will  be  seen  by 
reference  to  the  following  table.  Interest  at  seven  per 
cent,  per  annum,  paid  and  reloaned  half  yearly,  accumu- 
lates a  sum  equal  to  the  principal  in  ten  years  and  one 
month. 

TABLE. 

INTEREST    AT    SEVEN    PER    CENT.    OH  $300. 


1st  half  year  they  earn 
by  their  labor  

$300  00 

Amount  brought  up 
5th  half  year's  labor  .  . 

$1,308  74 
300  00 

per  cent  

10  50 

1  608  74 

310  50 

6  months'  interest.  .  .  . 

56  30 

2d  half  year's  labor.  .  .  . 

300  00 

1,665  04 

610  50 

6th  half  year's  labor.. 

.      300  00 

631  87 
300  00 

6  months'  interest.  .  .  . 

1,965  04 
68  78 

6  months'  interest  

931  87 
32  61 

7th  half  year's  labor  .  . 

2,033  82 
.      300  00 

4th  half  year's  labor.  .  . 

964  48 
800  00 

6  months'  interest  

2,333  82 
81  68 

6  months'  interest.  .  .  . 

1,264  48 
44  26 

8th  half  year's  labor.. 

2,415  50 
.       300  00 

1.308  74 

2,715  50 

128 


INCREASE  OF  PEOPERTY  BY  LABOR 


Amount  brought  up 
6  months'  interest  

9th  half  year's  labor.  . 

$2,715  50 
95  04 

2,810  54 
.      300  00 

Amount  brought  up 
15th  half  year's  labor.. 

6  months'  interest  

$5,488  69 
SOO  00 

5,788  69 
202  60 

6  months'  interest.  .  .  . 
10th  hulf  year's  labor. 

3,110  54 
.      108  87 

3,219  41 
.      300  00 

1  6th  half  year's  labor.. 
6  months  interest  

5,991  29 
300  00 

6,291  29 
220  20 

6  months'  interest  

3,519  41 
.      123  18 

17th  half  year's  labor.. 

6,511  49 
300  00 

llth  half  year's  labor. 

3,642  59 
.       300  00 

6  months'  interest  

6,811  49 
238  40 

6  months'  interest.  .  .  . 

3,942  59 
.       137  99 

18th  half  year's  labor.. 

7,049  89 
300  00 

12th  half  year's  labor. 

4,080  58 
.      300  00 

6  months'  interest  

7,349  89 
257  25 

6  months'  interest,  .  .  . 
13th  half  year's  labor. 

4,380  58 
.      153  32 

4,533  90 
.      300  00 

19th  half  year's  labor.. 
6  months'  interest  

7,607  14 
300  00 

7,907  14 
276  75 

6  months'  interest  .... 

4,833  90 
.      169  18 

20th  half  year's  labor.. 

8,183  89 
300  00 

14th  half  year's  labor. 

5,003  08 
.      300  00 

6  months'  interest  

8,483  89 
49  49 

6  months'  interest.  .  .  . 

5,303  08 
.      185  61 

5,488  69 

Add  one  month's  labor 

8,533  38 
.       50  00 

$8,583  38 

In  the  first  ten  years  and  one  month,  the  two  men  earn 

by  their  labor $6,050  00 

Interest  thereon  during  this  period 2,533  38 

8,588  33 

In  the  2d  ten  years  and  one  month,  the  interest  on  this 
sum  equals  the  principal 8,583  38 

17,166  76 


COMPARED  WITH   LEGAL   INTEKEST.  129 

Amount  brought  over $1*7,166  76 

2d  10  years  and  1  month's  labor,  and  interest  thereon . .        8,583  38 


25,750  14 
8d  "  interest 25,750  14 

51,500  28 
3d  "  labor  and  interest  thereon...       8,583,38 


60,083  66 
4th  "  interest 60,08366 


120,167  32 
4th  "  labor,  and  interest  thereon  . .       8,583  38 


128,750  70 
In  40  years  and  4  months  the  men  earn  by  their  labor. .     24,200  00 

Remainder  accumulated  by  interest $104,550  70 

The  interest  on  the  sum,  $24,200,  earned  by  their 
labor  is  $104,550  70 — over  four  and  a  quarter  times  more 
than  they  have  earned  by  their  labor.  Suppose  the  two 
men  to  live  twenty  years  and  two  months  longer — that 
is,  to  the  age  of  eighty-one  years  and  six  months — and 
continue  to  loan  their  money.  During  this  period  it 
would  double  twice. 

Thus $128,750  70 

10  years  and  one  month's  interest 128,750  70 

257,501  40 
2d  10  years  and  one  month's  interest 257,501  40 

Total  accumulation  in  60  years  and  6  months $515,002  80 

The  two  men  do  not  labor  during  the  last  20  years  and 

2  months,  and  expend  for  their  living  during  that 

period 

In  40  years  and  4  months,  they  earn  by  their  labor 
$24,000,  and  live  twenty  years  and  2  months  on  their 
money  without  labor 

Subtract  money  earned  by  labor 24,200  00 

Remainder  accumulated  by  interest  on  $24,200 $475,800  00 

6* 


130       INCREASE  OF  PROPERTY  BY  LABOR 

Every  dollar  of  the  $475,800  is  earned  by  the  labor  of 
others  and  given  to  the  two  men,  as  the  legal  interest 
upon  $24,200.  These  men  live  laboriously,  and  work  for 
a  very  moderate  compensation.  They  take  only  the 
legal  rate  of  interest,  and  do  not  demand  the  principal 
of  the  money  as  long  as  the  interest  is  paid.  Neither 
do  they  enter  into  any  speculations.  It  is,-  therefore, 
said,  that  labor  earns  their  large  fortunes.  Cases  similar 
to  this  are  often  brought  to  prove  that  an  industrious 
man  may,  by  his  labor,  accumulate  a  large  property. 
That  this  conclusion  is  erroneous,  is  manifest  from  the 
foregoing  table,  by  which  it  appears,  that  more  than 
nineteen  out  of  twenty  parts  of  the  large  fortunes  of 
these  men  are  earned  by  others,  and  paid  to  them  to 
satisfy  the  legal  interest  on  their  loans  of  money. 

Now  let  us  suppose  the  intereston  money  to  be  one  per 
cent.,  and,  with  this  difference  only,  these  two  men  to  be 
placed  in  the  same  circumstances  in  which  they  have 
been  already  described.  They  earn  over  and  above  their 
expenses  a  dollar  a  day,  three  hundred  days  in  each  year, 
during  a  period  of  forty  years  and  four  months.  They 
loan  their  earnings  at  the  legal  rate  of  interest,  (one  per 
cent.,)  and  collect  and  reloan  the  interest  half-yearly. 

TABLE. 

INTEREST  AT  ONE  PER  CENT.  ON  $300. 


1st  half  year's  labor $300  00 

6  month's  interest  at  1  per 
cent., 1  60 


801  60 
2d  half  year's  labor ....      300  00 


601  60 
6  months'  interest 801 


604  61 


Amount  brought  up'  •     604  51 
3d  half  year's  labor. . .      300  00 

904  51 
6  months'  interest. . .  4  62 


909  03 


4th  half  year's  labor. . .      300  00 
1,209  03 


COMPARED   "WITH   LEGAL   INTEREST. 


131 


Amount  brought  up 
6  months'  interest.  .  .  . 

$1,209  03 
6  05 

Amount  brought  up  $3,700  67 
6  months'  interest  18  50 

5th  half  year's  labor.  . 

I,fl5  08 
300  00 

3,719  17 
13th  half  year's  kbor.  .     300  00 

6  months'  interest  .... 

1,515  08 
7  58 

4,019  17 
6  months'  interest  ....        20  10 

6th  half  year's  labor.  . 

1,522  66 
.     300  00 

4,039  27 
14th  half  year's  kbor.  .     300  00 

6  months'  interest.  .  .  . 

1,822  66 
9  11 

4,339  27 
6  months'  interest  21  69 

7th  half  year's  kbor.  . 
6  months'  interest  .  .  . 

1,831  77 
.      300  00 

2,131  77 
10  66 

4,360  96 
15th  half  year's  kbor.  .      300  00 

4,660  96 
6  months'  interest  23  30 

8th  half  year's  labor  .  . 

2,142  43 
.      300  00 

4,684  26 
16th  half  year's  kbor.  .      300  00 

2,442  43 
12  21 

4,984  26 

9th  half  year's  labor.  . 

2,454  64 
.      300  00 

5,009  18 
17th  half  year's  labor.  .      300  00 

6  months'  interest.  .  .  . 

2,754  64 
13  77 

5,309  18 
6  months'  interest  26  55 

10th  half  year's  labor. 

2,768  41 
.      300  00 

5,335  73 
18th  half  year's  labor.  .      300  00 

6  months'  interest.  .  .  . 

1,081  -11 

15  34 

5,635  73 
6  months'  interest  28  18 

llth  half  year's  labor. 

3,083  75 
.      300,00 

5,663  91 
19th  half  year's  labor.  .      300  00 

6  months'  interest.  .  . 
12th  half  year's  kbor 

3,383  75 
..       16  92 

3,400  67 
.     300  00 

5,963  91 
6  months'  interest  29  82 

5,993  73 
20th  half  year's  labor.  .     300  00 

3,700  67 

6,293  73 

132       INCREASE  OF  PROPERTY  BY  LABOR 


Amount  brought  up  $6,293  73 
1  month's  interest 5  27 

6,299  00 


Amount  brought  up  $6,299  00 
1  month's  labor...  50  00 


6,349  00 


In  the  first  ten  years  and  one  month,  the  two  men  would 
earn  by  their  labor  the  same  sum  as  in  the  former  case, 
viz: $6,050  00 

Interest  during  that  period  at  1  per  cent,  on  the  money 
earned. 299  00 

6,349  00 

2d  ten  years  and  one  month's  interest  at  1  per  cent.,  re- 
loaned  half  yearly 671  73 


7,020  73 

2d  ten  years  and  one  month's  labor,  with  interest  thereon 
atlpercent 6,349  00 


13,369  73 
3d  ten  years  and  one  month's  interest  at  1  per  cent 1,414  53 


14,784  26 
3d  ten  years  and  one  month's  labor,  with  interest  thereon      6,349  00 


21,133  26 
4th  ten  years  and  one  month's  interest  at  1  per  cent 2,235  87 


23,369  13 
4th  ten  years  and  one  month's  labor,  with  interest  thereon      6,349  00 


$29,718  13 


In  the  above  forty  years  and  four  months,  the  two  men 
earn  by  their  labor  the  same  sum  as  when  interest  was 
at  7  per  cent.,  viz $24,200  00 

Interest  at  1  per  cent,  upon  this  sum  during  a  period  of 
forty-four  years  and  four  months 5,518  13 

$29,718  13 


COMPARED   WITH    LEGAL   INTEREST.  133 

Brought  over $29,718  13 

Interest  on  this  sum  at  1  per  cent,  for  twenty  years  and 
two  months,  or  until  the  men  arrive  at  the  age  of  eighty- 
one  years  and  six  months-; — first  ten  years  and  one 
month's  interest 3,144  17 


32,862  30 

2d  ten  years  and  one  month's  interest 3,475  80 

Total  amount  of  earnings,  and  interest  thereon  at  1  per 

cent,  for  sixty  years  and  six  months 36,338  10 

As  in  the  former  case,  suppose  the  men  to  live  the  last 
twenty  years  and  two  months  of  their  lives  upon  their 
money,  and  deduct  for  their  expenses 14,995  00 

$21,343  10 

With  interest  at  seven  per  cent.,  at  the  age  of  eighty- 
one  years  and  six  months  they  have  a  fortune  of  $500,000, 
while  with  interest  at  one  per  cent,  they  have  but  $21,343, 
making  a  difference  of  $478,656.  If  in  the  former  case 
they  decease  at  the  age  of  eighty-one  years  and  six 
months,  their  fellow-citizens  are  indebted  to  their  estates 
or  heirs,  $500,000,  with  an  annual  interest  of  $35,000  ; 
and  in  the  latter,  the  citizens  are  indebted  to  them  $21,343 
with  an  annual  interest  of  $213  44.  Even  at  one  per 
cent.,  the  interest  legally  accumulates  for  them  more  than 
one-half  as  much  as  they  earn  by  labor. 

Let  us  now  suppose  another  case,  of  two  men  who  be- 
come of  age  at  the  same  time  as  the  former  two,  and  who 
are  equally  good  workmen.  They  likewise  earn  a  dollar 
per  day  over  and  above  their  own  support ;  but  they 
marry,  and  have  the  expense  of  supporting  their  families. 
Each  rents  a  house  at  $100  per  annum ;  and  thus  one- 
third  of  their  surplus  earnings  is  paid  for  tenements. 
Their  earnings  must  also  supply  their  families  with  food, 
clothing,  fuel,  etc.  Although  these  two  men  work  as 
diligently  and  as  skillfully,  and  earn  as  much  as  the 
former  two,  yet,  instead  of  being  able  to  lend  money 


134:       INCREASE  OF  PROPERTY  BY  LABOR. 

upon  interest,  they  are  obliged  to  pay  interest  on  the 
houses  they  occupy.  Strict  economy  is  requisite  to  make 
one  dollar  a  day,  over  and  above  their  personal  expenses, 
school  their  children,  pay  rent,  and  furnish  neces- 
sary supplies.  These  two  men  labor  as  much  as  the 
former  two,  and  contribute  at  least  an  equal  share  to  the 
public  gOodk  All  their  earnings  are  devoted  to  the  pay- 
ment of  artisans,  teachers,  and  others,  whose  services 
they  require.  The  former  two,  without  performing  more 
labor  than  the  latter  two,  live  twenty  years  and  two 
months  without  labor,  and  leave  fortunes  to  the  amount 
of  $250,000  each.  The  latter  work  as  long  as  they  are 
able,  but  in  old  age  are,  perhaps,  compelled  to  seek  an 
asylum  in  the  poor-house. 

If  the  former  two  men  as  they  earned  their  money  had 
invested  it  in  farming  land,  or  in  houses  and  stores,  and 
had  rented  the  property  at  seven  per  cent,  on  its  cost, 
they  certainly  could  not  have  oppressed  the  producing 
classes  more  than  they  would  by  lending  them  money  at 
seven  per  cent.  In  either  case  they  would  compel  others 
to  earn  for  them  more  than  nineteen  out  of  twenty  parts 
of  their  fortunes.* 

The  amount  to  which  nations  and  individuals  are  in- 
debted, is  a  subject  of  general  complaint.  The  above 
illustration  exhibits  the  cause.  The  difference  in  the 
amounts  due  to  the  estates  of  these  men,  under  the  sup- 
posed circumstances,  can  be  traced  directly  to  the  differ- 
ence in  the  rates  of  interest.  '  At  the  rate  of  seven  per 

*  We  do  not  dispute  the  right  of  the  bachelors  to  use  all  the 
money  that  they  can  earn  by  their  labor,  and  to  lend  their  money  on 
interest  to  others  ;  but  the  interest  which  they  have  a  right  to  receive" 
from  others,  should  be  restricted  to  the  necessary  expenses  of  furnish- 
ing and  supporting  a  money  representative  of  value.  If  a  just  rate  of 
interest  be  maintained,  landlords  and  tenants,  in  voluntary  agree- 
ments, will  naturally  fix  upon  a  just  rate  of  rent ;  because  the  foun- 
dation upon  which  agreements  will  then  rest  will  be  just. 


TWO   PER   CENT.    INTEREST. 


135 


cent.,  a  sum  of  $500,000  is  due  to  their  estates.  It 
would  take  the  labor  of  a  single  man  for  more  than 
1,666  years  to  pay  this  principal ;  and  it  would  require,  at 
one  dollar  per  day,  the  constant  toil  of  more  than  116 
men  to  pay  the  yearly  interest  of  $35,000.  From  gene- 
ration to  generation,  they  might  continue  to  pay  the 
interest,  and  still  th$  burden  be  undiminished.  In  the 
short  space  of  sixty  years  and  six  months,  two  men 
entail  this  debt  upon  this  small  nation.  Not  the  labor 
of  these  two  men  entails  this  evil,  but  the  law  which 
fixes  the  unjust  rate  of  interest.  It  is  the  natural  result 
of  the  law,  and  must  be  alike  disastrous  to  large  and 
small  communities. 


SECTION  VH. 

TWO    PER     CENT.    PEB    ANNUM    TOO    HIGH    A    KATE     OF 
INTEREST. 

However  fertile  a  country  may  be,  interest  even  at 
two  per  cent,  per  annum  will  inevitably  oppress  the  pro- 
ducers. In  the  following  table  interest  is  calculated  at 
two  per  cent.,  under  the  same  circumstances  and  for  the 
same  period  as  in  the  former  cases.  The  interest  will  be 
found  far  to  exceed  the  principal. 

TABLE. 

INTEREST   AT   TWO   PER   CENT.    ON    $300. 

Amount  brought  up.      $609  03 
3d  half  year's  labor 300  00 


1st  half  year's  labor.  .  . 
6  months'  interest  at  2 

$300  00 
3  00 

2d  half  year's  labor  

30300 
800  00 

6  months'  interest  

60300 
6  03 

60903 

6  months' interest 


4th  half  year's  labor. 


918  12 
30000 

1,218  12 


136 


A   BATE   OF   INTEREST 


Amount  brought  up  $1,218  12 
6  months'  interest  1218 

Amount  brought  up 
6  months'  interest.  .  .  . 

13th  half  year's  labor.. 
6  months'  interest  .... 
14th  half  year's  labor.. 
6  months'  interest.  .  .  . 

15th  half  year'slabor.. 
6  months'  interest.  .  .  . 

16th  half  year'slabor.  . 

6  months'  interest.  .  .  . 
17th  half  year's  labor.. 
6  months'  interest.  .  .  . 
18th  half  year's  labor.. 
6  months'  interest.  .  .  . 
19th  half  year's  labor.. 
6  months'  interest.  .  .  . 

$3,804  76 
38  05 

6th  half  year's  labor... 
6  months'  interest  
6th  half  year's  labor.  .  . 
6  months'  interest.  .  .  . 
7th  half  year's  labor.  . 
6  months'  interest.  .  .  . 
8th  half  year's  labor.. 
6  months'  interest.  .  .  . 
9th  half  year's  labor  .  . 
6  months'  interest.  .  .  . 
10th  half  year's  labor.. 
6  months'  interest.  .  .  . 
llth  half  year's  labor.. 
6  months'  interest  
12th  half  year's  labor.. 

1,230  30 
30000 

3,842  81 
30000 

1,530  30 
15  30 

4,142  81 
41  43 

1,545  60 
30000 

1,845  60 
1846 

4,184  24 
80000 

4,484  24 
4484 

1,864  06 
80000 

4,529  08 
80000 

2,164  06 
21  64 

4,829  08 
4829 

2,18570 
30000 

4,877  37 
300  00 

2,485  70 
24  86 

2,510  56 
300  00 

5,177  37 
51  77 

2,810  56 
28  11 

5,229  14 
30000 

2,838  67 
3'00  00 

3,138  67 
31  39 

5,529  14 
55  29 

5,584  43 
30000 

3,170  06 
80000 

5,884  43 
58  84 

5,943  27 
800  00 

8,470  06 
8470 

3,504  76 
80000 

6,243  27 
6243 

8,804  76 

6,305  70 

OF  TWO   PER   CENT.  PEE    ANNUM. 


137 


Amount  brought  up 
20th  half  year's  labor  .  . 

$6,305  70 
30000 

Amount  brought  up  $14,815  07 
10  years  and  1  mouth's 

Add  one  month's  inte- 

6,605  70 
11  06 

18,107  42 

6,616  76 
50  00 

3d    10    years    and   1 
month's    labor   and 
interest         ...              6  666  76 

Add  10  years  and   1 
month's  interest  at  2 

6,666  76 

24,774  18 
10  years  and  1  month's 
interest                          5  505  88 

per  cent  

1,481  55 

-^^—^^^— 

2d    10    years    and    1 
month's  labor   and 

8,148  31 
6  666  76 

80,280  06 
4th    10    years   and   1 
month's    labor    and 
interest  6,66676 

14,815  07 

$36,946  82 

Add  the  interest  at  two  per  cent,  for  twenty  years  and 
two  months  longer,  until  the  men  reach  the  age  of 
eighty-one  years  and  six  months. 

1st  10  years  and  one  month's  interest 8,210  69 


2d  10  years  and  1  month's  interest. 


45,157  51 
10,035  35 


55,192  86 

In  forty  years  and  four  months  the  two  men  earn  by  their 
labor 24,200  00 

The  interest  upon  this  sum  for  a  period  of  sixty  years  and 

six  months,  even  at  two  per  cent.,  amounts  to 30,992  00 

$55,192  00 
This  is  $6,790  more  than  they  earn  by  their  labor. 


When  it  is  considered  that  this  interest  or  rent  is  paid 
for  the  mere  use  of  money  or  of  capital,  every  reflecting, 
honest  mind  must  be  convinced  that  two  per  cent,  is  a 
higher  rate  of  interest  than  a  people  can  afford  to  pay. 
It  is  surely  most  unreasonable  for  the  laws  to  compel 


138         TWO  PER  CENT.  INTEREST. 

producers  to  pay  for  the  use  of  the  property  which  a 
man  may  acquire  by  forty  or  fifty  years'  labor,  twice  or 
thrice  the  sum  of  the  property  so  earned.  The  thing 
produced  is  more  highly  estimated  than  the  power  that 
produces  it.  If  an  interest  of  two  per  cent,  upon  a  well 
regulated  currency  would  accumulate  the  property  of  a 
nation  in  the  possession  of  a  few,  can  it  be  considered 
strange  that  the  rates  of  three,  four,  five,  six,  and  seven 
per  cent,  and  even  higher  rates,  which  are  exacted  in 
different  countries,  should  have  concentrated  property 
into  so  few  hands  ?  The  only  wonder  is,  that  producers 
have  continued  to  live  under  this  oppression. 

A  rate  of  interest  of  even  two  per  cent,  per  annum, 
would  put  it  out  of  the  power  of  the  people  to  fulfil  their 
contracts.  The  establishment  of  this  rate  of  interest 
would  be  equivalent  to  the  passing  of  a  law,  compelling 
the  laboring  classes  to  double  the  capital  of  a  nation,  in 
favor  of  capitalists  once  in  thirty-four  and  a  half  years, 
besides  producing  their  own  support.  Suppose  a  foreign 
nation  owned  all  the  real  and  personal  estate  in  this 
nation,  and  a  fair  estimate  were  made  of  the  value  of  all ; 
and  then  our  people  were  legally  obliged  to  pay  two  per 
cent,  yearly  upon  this  valuation,  besides  maintaining 
themselves,  would  not  a  tribute  or  tax  like  this  keep  us 
forever  in  poverty  ?  Our  laws  enforce  much  higher 
rates  of  interest  on  capital,  which  are  little  less  oppressive 
to  the  great  body  of  our  producers,  because  they  are 
paid  to  a  few  capitalists  in  our  own  land  instead  of  So 
foreigners. 

It  may  be  objected  that  some  of  the  illustrations  of 
the  accumulative  power  of  interest  are  based  on  so  long 
periods  as  to  present  exaggerated  results ;  but  it  must 
be  borne  in  mind  that  interest,  and  rents,  at  too  high  rates 
are  continually  accruing  to  the  capital  of  nations,  and 
are  producing  their  evil  effects  upon  the  people  wtiether 
the  loans  be  for  longer  or  for  shorter  periods. 


REDUCED   INTEREST   A   BENEFIT.  139 


SECTION  VIII. 

THE  REDUCTION  OP  INTEREST  WOULD  BE  AN  EQUAL  BENE- 
FIT TO  THE  PRODUCING  CLASSES,  WHETHER  PROPERTY 
SHOULD  RISE  OR  FALL  IN  PRICE,  IN  CONSEQUENCE  OP 
SUCH  REDUCTION. 

It  may  be  supposed  that  if  interest  were  diminished  to 
one  per  cent.,  property  and  labor  would  rise  in  the  same 
proportion,  and  therefore,  the  producing  classes  would 
receive  no  benefit  from  the  reduction.  But  whether 
property  should  rise,  or  fall,  or  maintain  its  present  price, 
producers  would  have  the  same  relative  advantage ;  their 
gain  would  be  from  the  lessened  per  centage  on  capital. 
If  a  man  borrowed  a  hundred  dollars  for  a  year,  he 
would  pay  but  one  dollar  for  the  use  of  one  hundred, 
instead  of  paying  seven  dollars.  If  he  hired  a  hundred 
acres  of  land,  he  would  have  to  earn  only  one  acre  to 
pay  for  (he  use  of  one  hundred,  instead  of  being  obliged 
to  earn  seven  to  pay  for  their  use  ;  for  the  per  centage 
on  money  governs  the  rent  of  land.  This  principal  of 
the  adequate  reward  of  labor,  by  the  decrease  of  the 
interest  on  money,  although  property  and  labor  in  con- 
sequence should  rise  in  piice,  will  be  illustrated  in  the 
following  table.  The  price  of  labor  is  calculated  at  six 
dollars  per  day,  and  the  interest  on  money  at  one  per- 
cent, per  annum.  The  men  earn  their  money,  and  loan 
it  as  in  the  former  cases. 

TABLE. 

INTEREST  AT  ONE  PER  CENT. — LABOR  AT  $6  PER  DAY. 


1st  6  months'  labor. .     $1,800  00 
6  months'  interest  at  1 

per  cent 9  00 


Amount  brought  up  $1,809  00 
2d  half  year's  labor. . .     1,800  00 


3,609  00 
1,809  00 


140 


REDUCED   INTEEEST   A   BENEFIT 


Amount  brought  up.  . 
6  months'  interest  .... 

3d  half  year's  labor.  . 
6  months'  interest.  .  .  . 
4th  half  year's  labor.  . 
6  months'  interest.  .  .  . 
6th  half  year's  labor  .  . 
6  months'  interest.  .  .  . 
6th  half  year's  labor.  . 
6  months'  interest.  .  .  . 
7th  half  year's  labor.  . 
6  months'  interest  .  .    . 
8th  half  year's  labor.  . 
6  months'  interest.  .  .  . 
9th  half  year's  labor.. 
6  months'  interest.  .  .  . 
10th  half  year's  labor. 

$3,609  00 
18  04 

Amount  brought  up.  . 
6  months'  interest.  .  .  . 

llth  half  year's  labor. 
6  months'  interest.  .  .  . 
12th  half  year's  labor. 
6  months'  interest.  .  .  . 
13th  half  year's  labor. 
6  months'  interest  .  .  . 
14th  half  year's  labor 
6  months'  interest  
15th  half  year's  labor. 
6  months'  interest.  .  . 
16th  half  year's  labor 
6  months'  interest  .... 
17th  half  year's  labor. 
6  months'  interest.  .  .  . 
18th  half  year's  labor. 

$18,410  44 
92  05 

3,627  04 
1,800  00 

5,427  04 
27.14 

18,502  59 
.   1,800  00 

20,302  59 
101  51 

5,454  18 
1,800  00 

20,404  10 
1,800  00 

7,254  18 
36  27 

7,290  45 
1,800  00 

22,204  10 
111  02 

22,315  12 
.  1,800  00 

9,090  45 
45  45 

24,116  12 

.       120  58 

9,135  90 
1,800  00 

24,235  70 
.  1,800  00 

10,935  90 
54  68 

10,990  58 
1,800  00 

12,790  68 
63  95 

26,035  70 
130  18 

26,165  88 
.   1,800  00 

27,965  88 
13988 

12,854  53 
1,800  00 

28,105  76 
.  1,800  00 

14,654  53 
73  27 

29,905  7^ 
.       149  53 

80,055  29 
.    1,800  00 

81,855  29 
159  28 

14,727  80 
1,800  00 

16,527  80 
82  64 

16,610  44 
.  1,800  00 

18,410  44 

32,014  57 
.  1,800  00 

33,814  57 

WHETHER   PRICES   RISE   OR   FALL.  141 


Amount  brought  up. .  $33,814  57 
6  months'  interest 1C9  07 

33,983  64 
19th  half  year's  labor. .  1,800  00 


35,783 
6  mouths'  interest 178 


35,962  56 


Amount  brought  up. .  $35,962  56 
20th  half  year's  lacor  .    1,800  00 

37,762  56 
1  months'  interest. ...          31  47 

37,794  03 
1  months'  labor 300  00 


$38,094  03 


10  years  and  1  month's  labor  and  interest $38,094  03 

2d  10  years  and  1  mouth's  interest 4,030  44 

42,124  47 
10  years  and  1  month's  labor  and  interest 38,094  03 


80,218  60 
10  years  and  1  month's  interest 8,487  24 


88,705  74 
10  years  and  1  month's  labor  and  interest 38,094  03 

126,799  77 
4th  10  years  and  1  month's  interest 13,415  34 


140,215  11 
10  years  and  1  month's  labor  and  interest 38,094  03 


$178,309  14 


In  40  years  and  4  month?,  the  two   men  earn  at  $6  per 

day $145,200  00 

Interest  thereon  for  40  years  and  4  months  at  1  per  cent.    33,109  14 

178,  30J  14 

Let  the  interest  on  $178,  309  14  accumulate  20  years  and 
2  months,  until  the  men  arrive  at  the  age  of  81  years 
and  6  months.  Interest  on  $178,309  14  for  10  years  at 
1  percent 18,865  02 


197,174  16 
2d  10  years' interest 20,854  80 

218,028  90 


142  EFFECTS    UPON    PEODUCER8 

Amount  brought   up $218,028   96 

The  men  cease  to  labor  at  the  age  of  61  years  and  4 
months,  and  expend  during  20  years  and  2  months,  six 
times  more  than  when  labor  was  at  $1  per  day.  They 
expend  six  times  $14,996.  Deduct 89,970  00 


$128,058  96 


With  interest  at  peven  per  cent.,  and  labor  at  $1  per 
day,  (see  Sec.  VI.,)  the  two  men  leave  to  their  heirs 
$500,000  ;  while  with  interest  at  one  per  cent.,  and  labor 
at  $6  per  day,  they  leave  to  their  heirs  $128,058,  only  a 
fraction  over  one-fourth  as  much  as  in  the  former  case. 
The  interest  on  $500,000  at  seven  per  cent.,  would  be 
$35,000  annually.  It  would  take  the  labor  of  one  man  at 
$1  per  day,  one  hundred  and  sixteen  years  to  pay  the  in- 
terest for  a  year.  The  interest  on  $128,058  atone  per 
cent.,  would  be  $1,280.  The  labor  of  one  man  for  two 
hundred  and  thirteen  days,  at  $6  per  day,  would  pay  the 
interest  for  a  year. 

SECTION  IX. 

EFFECTS   UPON   PRODUCERS     OF     HIGH     AND    FLUCTUATING 
RATES    OF   INTEREST. 

The  following  illustration,  based  upon  land,  will  show 
the  effect  of  high  and  varying  rates  of  interest  upon 
producers,  and  the  safety  with  which  money  could  be 
loaned,  if  interest  were  reduced  to  a  just  and  uniform 
rate. 

Suppose  W.  owns  a  thousand  acres  of  land,  which  he 
has  bought  from  the  Government,  and  upon  which  he  is 
paying  the  taxes.  The  land  will  produce  no  income,  un- 
less he  cultivates  it  himself,  or  sells  or  rents  it  to  others, 
who  will  cultivate  it.  He  sells  the  land  in  five  tracts,  of 
two  hundred  acres  each,  at  five  dollars  per  acre.  A.,  13., 


OF   VARYING    RATES   OF   INTEREST.  143 

C.,  D.,  and  E.,  are  the  purchasers,  and  move  upon  and 
cultivate  the  land,  and  pay  the  taxes.  No  other  payment 
is  to  be  made  for  five  years,  at  the  expiration  of  which 
period,  A.,  B.,  C.,  D.  and  E.,  are  to  pay  up  the  interest 
on  their  respective  tracts  of  land,  and  after  that  to  pay 
the  interest  annually.  All  the  land  sold  is  of  nearly  the 
same  quality.  Each  purchaser  agrees  to  pay  a  thousand 
dollars,  and  gives  a  bond  and  mortgage  upon  his  land  to 
secure  the  payment.  W.  takes  A.'s  bond  and  mortgage, 
bearing  two  per  cent,  interest;  B.'s  bearing  four  per 
cent. ;  C.'s  bearing  eight  per  cent. ;  D.'s  bearing  sixteen 
per  cent. ;  and  E.'s  bearing  thirty-two  per  cent,  interest. 
At  the  end  of  five  years,  A.'s  bond  and  mortgage  will 
have  drawn  $100  ;  B.'s  $200  ;  C.'s  $400  ;  D.'s  $800  ;  and 
E.'s  $1,600  interest.  Yet  W.  sells  the  land  to  all  at  the 
same  price,  and  all  the  difference  in  the  indebtedness  of 
A.  and  E.  is  caused  by  the  difference  in  the  rates  of  interest 
that  W.  charges  them.  This  difference  makes  E.  in- 
debted to  W.  $1,500  more  than  A.  All  the  debtors  must 
pay  the  interest  with  the  products  of  their  respective 
farms,  and  W.  does  none  of  the  labor  toward  making  the 
production. 

Now  let  X.  sell  the  same  land  to  the  parties  on  a 
credit  of  one  year,  and  charge  them  six  per  cent,  in- 
terest. Suppose  money  to  be  so  scarce,  that  at  the  end 
of  the  year  they  clear  only  the  interest,  and  are  com- 
pelled to  lose  their  farms  by  foreclosure,  or  else  to  borrow 
the  money  and  pay  off  their  mortgages.  A.,  B.,  C.,  D.  and 
E.  borrow  on  the  best  terms  possible,  on  mortgage  of 
their  farms  and  stock.  A.  procures  the  money  at  two 
per  cent,  interest ;  B.  at  four  per  cent.  ;  C.  at  eight  per 
cent. ;  D.  at  sixteen  per  cent. ;  and  E.  is  compelled  to  pay 
thirty-two  per  cent,  per  annum,  or  two  and  two-Jhirds 
per  cent,  a  month.  This  amounts  to  the  same  thing  as  if 
they  had  bought  their  farms  of  \V.,  agreeing  to  pay 
him  these  rat*  of  interest.  The  money  enables  them  to 


144  EFFECTS    UPON    PKODCCERS 

keep  possession  of  their  farms.  From  the  sales  of  their 
products  they  must  pay  the  different  debts  and  interest. 
The  rate  of  interest  in  each  case  decides  what  propor- 
tion of  the  products  shall  go  to  pay  for  the  use  of  the 
farm.  When  the  farmers  borrow  the  money  to  pay  off 
their  mortgages,  they  do  not  keep  the  money.  It  con- 
tinues to  circulate,  and  to  decide  what  rents  others  shall 
pay  for  the  privilege  of  keeping  the  use  of  property  for 
a  given  period. 

But  suppose  the  rate  of  interest  to  be  fixed  at  one  per 
cent.,  and  that  money  could  always  be  obtained  on  the 
offer  of  good  security.  Those  who  had  money  to 
lend  would  ascertain  whether  the  property  offered  as 
security  would  make  the  interest  safe.  If  so,  the  security 
would  be  deemed  good.  When  interest  is  liable  to  rise 
from,  six  to  twelve  per  cent.,  the  lenders  of  money  require 
securities  that  will  make  their  loans  safe  if  the  interest 
should  rise  to  the  latter  point.  But  if  the  supply  of 
money  were  such  that  the  interest  could  not  rise,  a  less 
security  would  always  keep  loans  safe.  Suppose,  then, 
the  rate  of  interest  to  be  at  one  per  cent.,  and  W.  to  sell 
the  land  to  A.,  B.,  C.,  D  and  E.,  as  before.  They  purchase 
two  hundred  acres  apiece  at  $5  per  acre,  and  pay  only 
the  taxes  until  the  end  of  five  years,  when  they  pay  the 
interest  for  the  whole  period.  The  interest  at  one  per 
cent,  on  $1,000,  for  five  years,  amounts  to  $50  ;  and  on  the 
whole  $5,000,  to  but  $250,  instead  of  $4,100,  the  amount  in 
the  former  case,  when  the  money  was  loaned  at  the  various 
and  higher  rates  of  interest.  The  tenants  have  as  much 
the  use  of  the  farms  to  enable  them  to  pay  the  $250  as  to 
pay  the  $4,100.  If  they  niake  any  reasonable  improve- 
ment on  them,  W.  can  incur  no  hazard  of  losing  his 
money,  for  each  farm  would  certainly  rent  for  $10  a  year. 
Even  if  at  the  close  of  the  five  years  the  farmers  should  not 
have  paid  the  interest,  and  each  farm  would  rent  for 
$1050  a  year,  over  and  above  the  taxes,  each  farm 


OF   VARYING    RATES    OF   INTEREST. 

would  still  be  as  good  as  $1,050,  at  interest,  at  one  per 
cent. ;  therefore,  in  either  case,  the  tenants  would  keep 
the  sale  of  the  land  good,  or  the  loan  safe  for  W.,  with- 
out his  personal  labor.  But  if  W.  sell  the  farms,  when 
interest  is  at  six  per  cent.,  at  the  end  of  the  five  years 
each  of  the  farmers  would  owe  him  $300  interest,  which, 
added  to  the  principal,  would  make  $1,300.  The  interest 
on  this  sum,  at  six  per  cent.,  would  be  $78  annually,  and 
unless  each  farm  would  rent  for  this  sum,  W.'s  debts 
would  not  be  safe.  The  per  centage  rent  on  the  valua- 
tion of  property  must  be  equal  to  the  rate  per  cent, 
interest  on  money,  or  the  property  cannot  be  good 
security  for  the  payment  of  the  money. 

It  is  commonly  said  and  supposed  that  borrowers  pay 
a  certain  rate  of  interest  for  the  use  of  money.  But  they 
do  not  use  the  money ;  they  part  with  it  in  some  way  for 
property,  and  the  rate  of  interest  determines  what  rent 
they  shall  pay  for  the  use  of  the  property.  A  few  illus- 
trations will  show  the  effect  of  increased  rates  of  interest 
upon  the  welfare  of  producers  and  distributers  whose 
property  is  in  their  products.  Suppose  a  planter  raises 
a  hundred  bags  of  cotton,  in  doing  which  he  becomes 
indebted  for  bagging,  rope,  clothing  for  his  workmen, 
etc.  Let  him  be  compelled  to  realize  the  money  for  his 
crop  as  soon  as  he  can  get  it  to  market,  and  at  a  time 
when  money  is  very  scarce,  and  the  price  of  cotton 
extremely  low.  He  is  obliged  either  to  sell  for  cash,  or 
to  offer  a  commission  to  some  one  to  accept  his  draft  on 
the  pledge  of  the  cotton ;  and  is  forced  to  pay  for  his 
acceptance,  say  two  and  a  half  per  cent.  This  will  take 
the  proceeds  of  two  and  a  half  bales  of  cotton.  If  the 
draft  be  drawn  on  three  months'  time,  and  the  scarcity 
of  money  compel  the  planter  to  sell  the  draft  at  two  per 
cent,  a  month,  six  bales  more  will  be  taken  from  his  one 
hundred  bales.  He  must  lose  eight  and  a  half  bales  for 
the  privilege  of  keeping  the  remainder  three  months  in 
1 


146  EFFECTS   OF    VARIOUS   KATES. 

store,  besides  the  storage,  cartage,  and  the  commission 
on  sales.  The  proceeds  of  the  eight  and  a  half  bales  of 
cotton  are  gained  by  the  capitalist  by  means  of  the  high 
rate  of  interest,  and  without  any  adequate  labor  on  his 
part.  Under  a  true  monetary  system,  the  planter  would 
be  able  to  hold  his  cotton  a  year  without  losing  even  two 
bales  of  it  for  the  advance  of  money. 

Again,  a  manufacturer  makes  a  package  of  a  hundred 
pieces  of  cloths,  and  sends  them  to  market.  Six  months 
pass  before  the  goods  can  be  sold,  and,  with  interest  at 
six  per  cent,  per  annum,  he  loses  three  pieces  as  the  inter- 
est on  the  ninety-seven  which  he  has  left.  If,  at  the  end 
of  six  months,  the  commission  merchant  sell  them  on  a 
credit  of  eight  months,  at  the  above  rate  of  interest  the 
manufacturer  must  lose  four  pieces  more,  in  all  seven 
pieces  of  cloth.  But  suppose  the  manufacturer  is  greatly 
in  need  of  money,  and  must  have  the  eight  months'  note 
cashed.  Let  the  commission  merchant,  in  consequence  of 
a  rise  of  interest,  sell  the  note  in  market  at  two  per  cent. 
a  month  discount,  and  the  manufacturer  must  lose  sixteen 
pieces  of  cloth  on  the  note,  instead  of  four  pieces,  the  loss 
at  six  per  cent.  Add  these  to  the  first  three,  and  it  will 
make  nineteen  pieces,  paid  to  others  out  of  the  one  hun- 
dred pieces,  to  enable  him  to  keep  eighty-one  pieces,  or 
their  proceeds,  for  fourteen  months.  These  are  a  total 
loss  to  the  manufacturer.  Besides,  he  has  to  pay  cartage, 
storage,  commission  and  transportation.  The  proceeds 
of  the  nineteen  pieces  of  goods  go  into  the  hands  of  the 
money-lender. 

Now  let  us  see  the  result  in  the  same  transaction,  with 
interest  on  money  diminished  to  one  per  cent,  and  main- 
tained at  that  rate.  The  manufacturer  sends  the  hundred 
pieces  of  cloths  to  market,  and  they  lie  six  months  unsold. 
He  loses  only  half  a  piece  of  cloth  for  the  six  months' 
interest  on  his  goods.  The  commission  merchant  soils 
them  on  eight  months'  credit,  as  before,  and  gets  the 


HIGH   KATES    OF    INTEREST.  147 

note  discounted  at  the  rate  of  one  per  cent,  per  annum. 
This  amounts  to  two-thirds  of  apiece  of  cloth,  and  added 
to  the  half  piece,  is  a  loss  to  the  manufacturer  of  one 
piece  and  one-sixth  of  a  piece  during  the  fourteen  months, 
instead  of  being  a  loss,  as  in  the  former  case,  of  nineteen 
pieces.  This  difference  is  caused  solely  by  the  difference 
in  the  rate  of  interest.  Although  the  bales  of  cotton  or 
the  pieces  of  goods  lie  unused  and  uninjured  in  the  store- 
house, yet  a  number  of  bales  of  cotton  or  pieces  of  goods 
are  taken  from  their  owners  by  the  legal  growth  of  the 
money,  or  by  the  growth  or  accumulation  on  the  paper 
obligation  given  to  obtain  the  money.  The  rate  of  inter- 
est decides  how  many  bales  of  cotton  shall  be  owned  by 
the  planter — how  many  pieces  of  goods  shall  be  owned 
by  the  manufacturer ;  and  the  proportion  of  them  that 
shall  be  given  to  those  who  lend  the  money  to  represent 
their  value. 

SECTION  X. 

THE  OPPRESSION  OF  LABOR  BY  A  MONOPOLY  OF  LAND 
NOT  AS  GREAT  AS  THE  OPPRESSION  BY  HIGH  RATES  OF 
INTEREST  ON  MONEY. 

It  is  supposed  by  many  that  the  monopoly  of  land  is 
the  cause  of  the  centralization  of  wealth,  and  that  land- 
owners are  the  greatest  oppressors  of  the  laboring  classes. 
They  think  that  if  all  had  access  to  a  certain  portion  of 
land,  the  means  of  support  would  be  within  reach  of 
all.  But  if  the  land  were  equally  divided,  many  persons 
are  not  qualified  to  improve  it  to  good  advantage,  nor  are 
all,  or  nearly  all,  capable  of  manufacturing  the  imple- 
ments which  must  be  used  in  its  cultivation.  The  mecha- 
nical arts  are  absolutely  necessary  to  the  improvement  of 
the  land  ;  and  men  who  are  engaged  in  these  arts  require 
very  little,  if  any  land,  to  cultivate,  because  their  time  is 


148  HIGH    RATES    OF   INTEREST 

occupied  with  the  various  trades  by  which  agriculturists 
and  others  are  supplied  with  houses,  implements  of  indus- 
try, clothing,  and  so  forth.  A  monopoly  of  manufac- 
tured articles  would  be  as  likely  to  cause  the  evil  as  a 
monopoly  of  land;  for  if  all  implements  of  agriculture 
were  held  by  a  few,  it  would  be  nearly  impossible  to  culti- 
vate the  land ;  and  should  all  owners  of  houses  refuse  to 
receive  tenants,  more"  than  three-quai'ters  of  the  people 
in  our  large  cities  would  be  turned  into  the  streets. 
Doubtless  it  is  for  the  interest  of  landlords  to  rent  their 
houses,  but  it  is  equally  for  the  interest  of  landowners  to 
lease  or  rent  out  their  lands  :  for,  if  they  keep  them  in 
their  own  possession,  neither  the  houses  nor  lands  can  be 
useful  to  their  owners,  except  so  far  as  they  can  cultivate 
the  one,  and  live  in  the  other.  The  same  is  trtfe  of  all 
kinds  of  implements  and  merchandise.  Neither  lands 
nor  products  have  any  natural  monopolizing  power.  The 
monopolizing  power  is  an  artificial  one,  instituted  by  our 
national  laws,  and  is  in  the  money  which  represents  the 
property  and  products.  The  monopoly  is  one  of  the  effects, 
it  is  not  the  cause  of  the  evil.  If  the  land  and  wealth 
were  now  to  be  equally  distributed,  the  same  cause  which 
has  thus  far  centralized  them  would  accumulate  them 
again  in  the  hands  of  a  few.  In  the  illustration  of  the  one 
hundred  families  and  their  descendants,  (see  Chap.  III., 
Sec.  II.,)  no  land  is  bought  except  the  two  hundred  acres 
for  their  personal  residences ;  yet  they  take  from  the 
people  as  large  a  quantity  of  their  products,  by  the  inter- 
est on  money,  or  on  their  obligations,  as  if  they  had  invested 
the  twenty  millions  in  farming  land,  and  let  the  land  out 
to  tenants  at  six  per  cent,  interest  on  its  cost,  reinvesting 
the  interest  half-yearly  in  land  during  the  hundred  and 
fifty  years.  The  tenant  of  leased  land  pays  the  rent  by 
the  sale  of  its  yearly  products.  If  he  cannot  support 
himself  well  besides  paying  the  rent,  it  is  evident  to  all 
that  the  rent  is  too  high.  The  landlord  and  the  tenant 


WORSE   THAN   LAND   MONOPOLY.  149 

come  in  direct  contact,  and  the  wrong  done  by  the  former 
to  the  latter  is  manifest.  But  nothing  grows  upon  mo- 
ney with  which  the  borrower  can  pay  the  interest.  He 
exchanges  it  for  merchandise  or  lands,  and  expects  to 
make  a  profit  on  them  which  will  pay  the  interest  on  the 
money.  If,  however,  he  be  not  able  to  pay  the  interest, 
it  is  set  down  as  bad  management  on  his  part,  instead  of 
being  attributed  to  the  too  high  rate  of  interest  on  the  mo- 
ney. The  owner  of  money,  by  the  legal  interest,  imposes 
as  great  hardships  upon  the  borrower,  as  if  he  had  lent 
him  land  or  merchandise  at  the  same  per  centage  on  its 
valuation. 

The  following  illustration  will  show  the  different  esti- 
mates put  upon  the  leasing  of  land  at  a  certain  per  centage 
on  its  value,  and  the  lending  of  money  at  the  same  rate. 
K.  is  the  owner  of  $100,000.  He  expends  thte  sum  for 
well-improved  farms,  which  he  leases  in  perpetuity  at  six 
per  cent,  per  annum  on  their  cost.  His  tenants  are, 
therefore,  obliged  to  pay  $6,000  a  year  for  the  use  of  the 
farms.  They  would  find  it  very  difficult  to  pay  so  high  a 
rent ;  and  it  would  be  deemed  very  oppressive  to  them 
and  to  their  heirs  who  must  work  the  land.  If  the  owner 
of  the  land  should  require  from  each  tenant  security  for 
the  rent,  so  that  one  must  become  responsible  for  the 
payment  of  another's  rent,  he  would  be  thought  a  hard 
landlord.  And  if  in  time  of  drought  or  disease,  which 
rendered  the  tenants  unable  to  pay  their  rent,  the  land- 
lord should  sell  the  stock  from  their  farms,  he  would  be 
deemed  very  oppressive,  although  his  tenants  had  volun- 
tarily entered  into  the  engagement. 

Now,  suppose  M.  to  own  $100,000,  which  he  lends  on 
interest  at  six  per  cent,  per  annum  payable  half-yearly. 
To  secure  the  loan,  he  requires  double  its  value  in  land, 
so  that  he  is  twice  as  well  secured  as  the  landowner. 
He  allows  the  principal  to  remain  outstanding  as  long  as 
the  interest  is  regularly  paid.  He  annually  receives 


150  HIGH    RATES    OF   INTEREST 

$6,000  interest  on  his  money,  the  same  sum  that  the  land- 
owner receives  for  the  rent  of  his  land,  and  he  is  much 
better  secured,  for  in  some  years  the  crops  may  fail ;  but 
the  mortgage  on  land  of  twice  the  value  of  the  loan, 
is  a  double  security,  and  will  force  the  sale  of  the  farm 
if  the  interest  be  not  paid.  It  takes  as  many  of  the 
products  of  labor  to  pay  the  interest  to  the  money-lender, 
as  -to  pay  the  rent  to  the  land-owner ;  yet  the  money- 
lender is  deemed  a  just  and  honorable  man,  because  he 
takes  only  six  per  cent,  interest  for  his  money.  If  at 
any  time  the  scarcity  of  money  and  the  low  price  of  pro- 
ducts prevent  the  payment  of  the  interest,  and  the 
money-lender  foreclose  some  of  his  mortgages,  buying 
in  the  property,  worth  double  the  amount  lent,  at  half 
price,  no  stigma  rests  upon  his  character,  especially  if  the 
legal  rate  of  interest  be  seven  per  cent.,  and  he  charge 
but  six  per  cent.*  Although  these  cases  are  so  differently 
regarded,  the  oppression  by  lending  money  at  six  per 
cent,  interest  greatly  exceeds  that  by  leasing  property. 

The  following  illustration  shows  how  tenants  of  land 
are  affected  by  high  rates  of  interest  on  money.  N". 
owns  a  farm  which  he  cultivates.  He  is,  therefore,  the 
rightful  owner  of  the  products.  If,  however,  N.  lets  the 
farm  to  O.,  and  O.  cultivates  it,  then  N.  and  O.  are 
joint  owners  of  the  products.  This  principle,  that  labor 
and  capital  are  together  entitled  to  the  products,  is  in 
accordance  with  the  laws  of  nations,  and  must  continue 
to  be  so  as  long  as  the  rights  of  property  are  recognized 
by  civil  authority.  The  question  which  arises  for  settle- 
ment is,  what  proportion  rightfully  belongs  to  the  capital, 
and  what  to  the  labor — what  proportion  of  products  N. 
should  receive  for  the  use  of  the  farm,  and  what  propor- 
tion O.  should  receive  for  his  labor  in  cultivating  it.  It 
will  be  said  at  once  that  the  proportion  which  O.  is  to 

*  People  seem  to  look  upon  money  as  a  sort  of  sacred  thing,  and 
ou  labor  as  a  mere  tool  that  is  subservient  to  it 


WORSE  THAN  LAND  MONOPOLY.         151 

give  to  N.  is  a  matter  of  agreement  between  them  ;  and, 
therefore,  whatever  N".  agrees  to  take,  and  O.  agrees  to 
pay  for  the  rent  of  the  farm,  is  the  right  proportion  ;  and 
that  no  laws  should  interfere  in  such  contracts  except 
to  compel  their  fulfilment.  This  would  be  right,  and 
just  to  both  the  contracting  parties,  if  the  public  stand- 
ard of  value  on  which  -  they  are  compelled  to  found  the 
contract  were  equitable.  But  if  the  standard  or  rate  of 
interest  be  such  that  O.  is  obliged  by  its  legal  operation 
to  pay  nearly  the  whole  surplus  products  of  the  farm  to 
N.  as  rent,  the  contract  is  a  manifest  wrong  to  O. ; 
because,  although  he  work  diligently  all  his  life,  the 
legal  standard  will  keep  him  forever  poor,  while  N.,  by 
the  action  of  the  same  standard,  without  labor,  will 
constantly  increase  in  wealth. 

We  declare  that  all  men  are  born  free  and  equal ;  but 
N.  may  be  born  heir  to  a  dozen  farms,  while  O.  may  be 
born  without  property ;  and,  under  present  laws,  by  his 
labor  alone  he  cannot  acquire  it.  Therefore,  N.  is 
actually  born  to  live  in  luxury  without  labor,  and  O.  is 
born  to  be  a  servant  to  N.  O.'s  children  are  born 
servants  to  N.,  and  to  his  posterity,  and  live  in  perpetual 
toil  and  hardship,  that  N.'s  children  may  be  supplied  with 
all  the  luxuries  of  life  without  labor.  N.  and  his  children 
receive  these  luxuries  from  the  rent  that  O.  and  his 
children  pay  for  the  use  of  the  land  owned  by  N".  If  all 
men  are  by  nature  free  and  equal,  why  has  legislation 
reversed  the  order  of  nature  so  as  to  secure  the  greatest 
possible  inequality  ?  It  is  not  in  the  power  of  man  to 
continue  a  more  effectual  method  of  concentrating  pro- 
perty in  a  few  hands,  than  by  high  rates  of  interest. 
This  method  works  rapidly  and  securely,  because  it 
extorts  consent  as  it  operates.  If  civilization  require 
that  property  should  descend  from  father  to  son,  it 
certainly  does  not  require  that  legislation  should  do  its 
utmost  to  magnify  the  inequalities  arising  from  this  right 


152  HIGH    EATES   OF   INTEREST. 

of  inheritance.  These  inequalities  only  exist  because  the 
whole  body  of  producers  are  obliged  to  pay  an  exorbitant 
price  for  the  yearly  rent  of  every  description  of  property  ; 
and  why  are  they  obliged  to  pay  this  price  ?  Because 
the  rent  is  determined  by  the  legal  interest  on  money, 
the  standard  of  value,  to  which  no  individual,  nor  class 
of  individuals,  can  offer  successful  resistance.  If  N., 
instead  of  leasing  the  farm  to  O.,  lend  him  money  with 
which  to  purchase  a  farm,  O.  rents  the  money  from  N. 
instead  of  renting  the  farm.  But  he  is  as  much  compelled 
to  pay  the  interest  on  the  money  with  the  products  of 
the  farm,  as  he  is  to  pay  the  rent  of  the  farm  with  the 
products.  If  the  interest  on  .money  were  at  one  per 
cent.,  N".  could  not  let  his  farm  to  O.  at  such  a  rate  as  to 
compel  O.  to  give  him  in  rent  a  sum  equal  to  the  princi- 
pal of  the  farm  in  less  than  about  seventy  years.  But  if 
interest  on  money  be  fixed  at  seven  per  cent.,  N.  can 
compel  O.  to  give  a  rent  for  the  farm  which  will  equal 
the  principal  of  the  farm  in  about  ten  years.  At  this  rate, 
in  seventy  years  O.  must  give  N.  the  value  of  one 
hundred  and  twenty-seven  farms  as  the  legal  rent  of 
one.  High  rates  of  interest  under  any  form  of  govern- 
ment will  centralize  the  wealth  of  the  nation,  and 
degrade  and  impoverish  its  producers.  In  fixing  the  rate 
of  interest,  governments  determine  what  proportion  of 
their  earnings  the  producing  classes  shall  pay  for  the  use 
of  capital.  Laborers  have  no  means  of  resisting  the 
overwhelming  power  of  accumulation  thus  given  to 
capital,  except  by  a  change  in  the  monetary  system,  ami 
the  establishment  of  a  just  rate  of  interest.  Then^he 
inequalities  of  birth  and  condition  will  be  greatly  dimin- 
ished, and  no  class  of  laborers  can  be  kept,  for  any  length 
of  time,  subservient  to  capital. 


KATE   OF   INTEREST   DETERMINES   PRICES.  153 


SECTIOX    XI. 

THE  BATE  OF  INTEREST  DETERMINES  THE  PRICE  OF  PRO- 
PERTY, AND  A  RISE  OF  INTEREST  INCREASES  THE 
POWER  OF  MONEY  TO  COMMAND  PROPERTY. 

The  value  of  money  is  determined  by  the  interest  that 
it  will  accumulate ;  and  the  value  of  all  property  is  deter- 
mined by  the  rent  that  can  be  obtained  for  it.  The 
market  value,  or  price  of  property  must  conform  to  the 
legal  standard. 

If  the  rent  of  any  property  be  not  sufficient  to  accumu- 
late a  sum  equal  to  the  estimated  value  of  the  property 
itself,  in  as  short  a  period  as  money  loaned,  the  property 
will  fall  in  price  until  the  rent  bears  the  same  proportion 
to  the  value  of  the  property  that  the  rate  of  interest  bears 
to  the  principal. 

It  is  perfectly  right  that  the  interest  on  money  should 
govern  by  its  own  per  centage  the  rent  of  all  property, 
because  money  is  the  legal  representative  of  all  property, 
and  the  standard  by  which  its  value  is  estimated.  This 
interest  is  of  the  same  quality  as  the  principal  loaned, 
and  each  fractional  part  is  of  proportional  value ;  and  the 
rents  of  property  must  conform  to  this  rule.  For  ex- 
ample, if  the  per  centage  be  in  the  proportion  of  one  to 
one  hundred,  the  tenant  of  a  hundred  acres  of  poorly  cul- 
tivated land  must  pay  as  rent  a  sum  in  money  equal  to 
the  value  of  one  acre  of  land  of  the  same  quality.  If 
he  improve  the  farm  and  make  it  produce  double,  he 
must  pay  the  value  of  one  acre  of  improved  land  for  the 
use  of  the  improved  one  hundred.  He  pays  more  value, 
but  no  greater  per  centage  on  the  value  of  the  land. 
Money  is  the  standard  ;  if  the  per  centage  interest  on  it 
be  fixed  at  a  just  rate,  it  will  equitably  regulate  the  rent 
of  all  property,  and  also  secure  to  labor  its  earnings. 
7* 


154:  THE   RISE   OF   INTEREST 

The  value  of  property  depreciates  in  proportion  to  the 
increase  of  the  value  of  the  dollar  that  measures  it. 
Whenever  the  value  of  money  increases  by  a  rise  of  in- 
terest, there  is  a  corresponding  decrease  in  the  value  of 
property.  Th«  diminution  of  the  market  value  of  pro- 
perty, by  a  rise  of  interest,  may  be  compared  to  the 
moving  of  a  fulcrum  on  the  beam  of  a  scale.  As  one  end 
of  the  beam  is  lengthened,  the  other  end  is  shortened,  so 
that  a  pound  weight,  on  the  long  end,  may  balance  as 
many  products  as  three,  four,  or  five  pounds  would 
before  the  fulcrum  was  moved.  So,  with  the  rise  of  in- 
terest on  money,  property  falls  in  price,  and  one  dollar, 
in  money,  balances  two,  three,  four,  or  five  times  more 
property  than  it  did  before  the  rise.  Enough  property 
must  be  added  to  make  the  rent  equal  to  the  interest  on 
money ;  for  no  man  will  invest  his  money  in  property 
unless  he  supposes  that  the  property  will  yield  as  good 
an  income  as  the  money  he  pays  for  it.  Therefore,  the 
price  of  property  must  fall  whenever  the  interest  on 
money  increases,  that  the  incomes  from  property  and 
from  money  may  be  equal.  When  the  power  of  the  dol- 
lar to  accumulate  is  increased,  no  alteration  is  made  in  its 
form,  weight,  or  external  appearance,  as  when  the  ful- 
crum is  moved  no  alteration  is  made  in  the  weight,  but 
the  power  of  the  weight  is  increased.* 


SECTION  XII. 

THE    RISE    OF    THK    RATE    OF    INTEREST    INCREASES    THE 
LIABILITIES    OF    ALT.   DEBTORS. 

All  obligations  for  the  payment  of  money  are  based 
upon  money,  and  hold  the  same  position,  with  respect  to 
labor  and  property,  that  money  does.  They  are  private 

See  Appendix,  B. 


INCREASES   DEBTS.  155 

representatives  of  their  amount  of  money,  and,  being 
secured  on  property,  call  for  the  payment  of  a  definite 
sum  of  money  as  principal,  and  a  definite  rate  of  interest. 
When  the  interest  on  money  rises,  property  falls  in  price, 
so  that  the  value  of  the  bonds,  notes,  mortgages,  etc., 
payable  in  money,  is  increased  with  respect  to  property, 
for  they  will  purchase  more ;  but  their  value  is  diminished, 
compared  with  money,  for  the  interest  on  money  is 
greater  than  the  interest  on  the  obligations.  Hence  the 
obligations  fall  below,  and  will  not  sell  for  their  par  value, 
although  they  continue  to  bear  the  same  rate  of  interest, 
and  to  call  for  the  same  amount  of  money  as  at  the  for- 
mer period.  The  value  of  money  has  increased  above  its 
former,  value,  instead  of  the  value  of  the  obligations  being 
diminished,  except  relatively.  The  obligations  still  de- 
mand the  same  amount  of  money,  which  will  now  draw 
a  higher  rate  of  interest,  and  command  a  greater  amount 
of  property.  But  the  amount  of  interest  which  the  obli- 
gations at  present  draw,  is  not  increased,  and  is  less  than 
that  on  money. 

For  example,  if  interest  rise  from  six  to  twelve  per 
cent.,  a  State  bond,  bearing  the  former  rate,  will  fall 
below  its  par  value,  but  Avill  continue  to  bear  the  same 
rate  of  interest  that  it  did  previously  to  the  rise  of  interest 
on  money ;  yet  the  bond  can  be  exchanged  for  more  pro- 
perty than  before  the  rise  of  interest.  Hence  the  liabili- 
ties of  all  debtors  whose  means  of  payment  are  in  their 
property,  or  in  their  ability  to  labor,  are  increased  in  pro- 
portion to  the  increase  of  interest  upon  money,  because 
the  full  amount  of  all  debts  must  be  paid  in  money,  of 
which  the  power  to  purchase  property  has  thus  much  in- 
creased— or,  in  other  words,  the  rise  of  interest  has 
decreased  the  market  value  of  property  and  labor,  so  that 
two,  three,  four,  or  five  times  the  quantity  formerly  re- 
quired, must  be  sold  to  procure  money  to  cancel  debts. 
Labor,  however  low  its  price,  is  no  tender  for  debts,  and 


156  THE   EISE   OF   INTEBEST 

must  be  disposed  of  for  money  before  it  can  be  a  legal 
equivalent  in  payment  for  anything.  When  goods  are 
sold  on  time,  the  property  of  the  purchaser,  both  real  and 
personal,  is  legally  bound  for  the  payment  of  the  debt ; 
and  although  the  purchase  of  the  goods  caused  the  debt 
to  exist,  no  kind  of  property  is  legally  competent  to  pay 
it.  The  debtor  must  convert  his  property  into  money 
for  this  purpose,  or  the  creditor  can  legally  enforce  the 
sale  of  a  sufficient  amount  of  the  debtor's  property  to 
satisfy  his  claim  and  pay  the  costs  of  suit.  The  debtor's 
property  is  collateral  security  to  the  money,  and  is  made 
subject  to  its  power,  but  the  property  has  no  legal 
authority  over  the  money. 

The  injustice  done  to  debtors  by  increasing  the  value 
of  the  measure  by  which  their  debts  were  contracted,  is 
evident.  It  has  already  been  shown  that  the  dollar  is 
the  measure  of  more  or  less  property,  according  to  the 
rate  of  interest.  Therefore,  debts  contracted  when  in- 
terest was  low,  and  falling  due  when  interest  is  high,  will 
require  a  much  larger  quantity  of  property  to  pay  them 
than  was  understood  in  the  contract.  The  following  is  a 
familiar  illustration  of  this  principle.  A  man  agrees  to 
make  and  deliver  to  another  nine  yards  of  cloth.  He 
brings  the  usual  amount  of  cloth  to  fulfil  the  contract, 
but  hi  the  meantime,  the  length  of  the  yard-stick  is  in- 
creased to  four  and  a  half  feet,  and  the  doth  falls  a  third 
short  of  the  required  length.  The  debtor  weaves  a  third 
more  on  the  end  of  the  piece,  and  presents  it.  The  length 
of  the  yard-stick  is  again  increased  to  six  feet,  and  the 
cloth  again  falls  short.  The  construction  of  the  yard- 
stick may  allow  its  length  to  be  increased  without  :ul<li- 
tional  labor,  but  the  debtor  is  obliged  to  add  both  labor 
and  material  to  produce  the  required  length  of  cloth. 
The  additional  cloth  is  fraudulently  taken  from  him  by 
the  increase  of  the  length  of  the  measure. 

To  exemplify  the  principle  with  respect  to  money,  the 


INCREASES   DEBTS.  157 

measure  of  value.  The  rise  of  interest  on  money  increases 
the  liabilities  of  all  debtors.  A  man  lends  on  mortgage 
of  a  house  and  three  vacant  lots,  $1,000  at  six  per  cent, 
interest.  The  interest  on  the  money  for  a  year  is  $60, 
and  the  house  of  the  borrower  rents  for  $60  a  year. 
The  rate  of  interest  increases  to  nine  per  cent.,  conse- 
quently the  interest  on  the  $1,000  increases  to  $90.  To 
make  the  loan  safe  at  the  advanced  interest,  the  bor- 
rower is  required  to  erect  another  house  on  one  of  the 
lots  covered  by  the  mortgage.  He  builds  one  costing 
$500,  and  lets  it  for  $30.  The  two  houses  now  bring  $90 
a  year,  just  the  interest  on  $1,000.  Interest  rises  to 
twelve  per  cent.,  and  the  holder  of  the  mortgage  requires 
the  borrower  to  erect  a  second  house,  costing  $500,  on 
another  vacant  lot  covered  by  the  mortgage.  This  house 
is  likewise  let  for  $30.  The  three  houses  rent  for  $120, 
and  the  mortgage  for  $1,000  draws  twelve  per  cent. 
The  mortgage  now  brings  in  as  much  income  as  the  three 
houses.  The  $1,000  as  much  balance  the  value  of  the 
three  houses  now,  as  they  did  that  of  the  one  house  when 
the  money  was  loaned  ;  for  it  now  takes  the  rent  of  three 
houses,  as  it  then  did  that  of  one  house,  to  pay  the  in- 
terest on  the  mortgage.  Two  houses  are  added  by 
material  and  labor,  and  no  material  or  labor  is  added  to 
the  mortgage  or  money ;  yet  the  mortgage  or  money 
at  twelve  per  cent,  interest,  is  worth  as  much  to  the 
holder  as  the  whole  property. 

As  the  value  of  money  increases,  the  market  value  of 
the  things  to  be  measured  by  it  decreases,  so  that  it 
works  in  a  double  ratio  against  producers,  for  rents  of 
property  diminish  as  interest  on  money  increases.  But 
in  the  foregoing  example,  this  feature  lias  not  boon  ex- 
hibited, no  diminution  of  rent  being  supposed  to  take 
place  in  consequence  of  the  rise  of  interest,  although  ex- 
poriouce  proves  that  this  is  the  invariable  result. 


158  INTEREST   INCREASES 


SECTION  XIII. 

BENTS,  WHETHER  HIGH  OR  LOW,  BEAR  THE  SAME  RELA- 
TIVE VALUE  TO  THEIR  PRINCIPAL;  BUT,  WHEN  THE 
PER  CENTAGE  INTEREST  ON  MONEY  IS  INCREASED,  NOT 
ONLY  IS  ITS  RELATIVE  PROPORTION  TO  THE  PRINCIPAL 
INCREASED,  BUT  EACH  FRACTIONAL  PART  HAS  IN- 
CREASED VALUE. 

It  is  proposed  to  show  that  there  is  a  wide  difference 
between  renting  property  and  lending  money,  and  that 
the  rent  and  market  value  of  property  decrease  in  pro- 
portion to  the  rise  of  interest,  whereas  the  market  value 
of  money,  and  of  the  interest  upon  it,  increases  in  direct 
proportion  to  the  rise  of  interest. 

If  the  rent  of  a  farm,  store,  or  house  rise  to  double, 
the  price  of  the  farm,  store  or  house  is  doubled.  If 
the  rent  of  the  farm  before  the  rise  be  $300  over  repairs, 
etc.,  and  money  be  at  six  per  cent,  interest,  the  farm  is 
worth  $5,000.  But  if  the  rent  rise  to  $600,  the  price  of 
the  farm  will  be  increased  to  $10,000.  Therefore,  if  the 
owner  invest  the  income  or  rent  in  other  land  before  the 
rise  of  rent,  he  can  buy  as  much  land  with  the  $300,  as 
he  can  buy  after  the  rise  with  $600.  If  the  rent  fall 
again  to  $300,  the  price  of  the  farm  will  fall  again  to 
$5,000 ;  but  the  $300  will  buy  twice  as  much  land  as 
it  would  if  the  rent  had  been  maintained  at  $600. 
Neither  the  rise  nor  the  fall  of  the  rent  alters  the  actual 
value  of  the  farm,  for  its  productiveness  is  neither  in- 
creased nor  diminished  by  either.  The  nutritive  proper- 
ties of  its  wheat  and  corn  cannot  be  altered  by  the  rise 
or  fall  of  its  rent.  But  the  dollar  received  when  the  rent 
is  $600,  is  worth  only  one-half  as  much  as  the  dollar 
when  the  rent  is  but  $300 ;  for  when  rents  are  low,  one 
dollar  will  buy  as  much  land  as  two  will  when  rents 


IN   GEOMETRICAL   PROGRESSION.  159 

are  double.  The  intrinsic  value  of  the  property  under- 
goes no  material  change,  but  the  standard  changes  by 
which  its  market  value  is  estimated.  Now  note  the  differ- 
ent effects  of  the  rise  of  the  rent  on  property,  and  the  rise 
of  the  interest  on  money.  Let  the  rate  of  interest  on 
money  rise  from  six  to  twelve  per  cent.,  and  the  rent  on 
property  will  inevitably  fall  in  about  the  same  ratio. 
The  price  of  property  will  of  course  fall  in  proportion  to 
the  fall  of  its  rent.  When  the  interest  on  money  is 
doubled,  the  value  of  every  dollar  received  as  interest  is 
doubled ;  for  each  dollar  of  interest  will  buy  double  the 
property  that  it  wrould  before  the  rise.  But  when  the 
rent  on  property  is  doubled  the  dollar  is  worth  but  half 
as  much  as  it  was  before,  for  it  will  not  purchase  more  than 
half  as  much  property  as  it  would  before  the  rise  of  rent. 

If  the  rent  on  land  rise  to  double,  the  land  itself  will 
sell  for  double  its  former  price ;  therefore,  the  rent  will 
not  double  its  principal  of  land  in  any  shorter  time  in 
consequence  of  the  rise.  But  when  interest  on  money 
rises  to  double,  the  interest  will  double  the  principal  in 
half  the  time  that  it  would  before  the  rise  of  interest. 
When  the  rent  on  land  rises,  the  rent  continues  to  hold 
the  same  relative  value  to  its  principal  of  land  that  it  did 
previous  to  the  rise.  But  when  the  interest  on  money 
rises  to  double,  the  relative  proportion  of  the  interest  to 
the  principal  is  doubled. 

For  example :  P.  lends  to  Q.  for  a  year  $20,000  at  six 
per  cent,  interest.  The  interest  amounts  to  $1,200.  P. 
invests  this  income  in  a  farm  at  the  then  market  price  of 
land.  At  the  commencement  of  the  following  year,  there 
is  a  scarcity  of  money,  and  P.  reloans  to  Q.  the  same 
$20,000  at  twelve  per  cent,  interest.  At  the  end  of  the 
year,  Q.  must  pay  to  P.  as  the  interest  on  the  $20,000, 
$2,400,  twice  the  sum  that  he  paid  the  previous  year. 
Scarcity  of  money  and  high  rates  of  interest  invariably 
depreciate  the  price  of  property.  Its  price  falls  oue-half, 


160  GEOMETRICAL   INCREASE   OF   INTEREST. 

so  that  each  dollar  of  the  $2,400  received  as  the  interest 
on  the  money  when  interest  is  high,  will  purchase  twice 
as  much  property  as  it  would  before  the  rise  of  interest. 
Hence,  if  the  interest  at  six  per  cent,  on  $20,000  will  buy 
a  farm  worth  $1,200,  when  the  interest  on  the  $20,000 
rises  to  twelve  per  cent. — i.  e.,  to  $2,400, — and  the  price 
of  the  farm  falls  one-half,  the  $2,400  will  buy  four  farms, 
all  as  good  as  the  first  bought  at  $1,200.  The  income 
from  the  $20,000  will  be  worth  four  times  as  much  as  it 
was  before  the  rise  of  interest. 

Making  the  calculation  in  dollars  and  cents,  we  shall 
arrive  at  the  same  result.  The  interest  on  $20,000  at  six 
per  cent,  is  $1,200.  Loan  the  $1,200  at  six  per  cent,  and 
it  will  accumulate  in  the  ensuing  year  $72.  Now  loan 
the  $20,000  at  twelve  per  cent,  and  we  have  $2,400  as  its 
interest  for  the  year.  Loan  the  $2,400  at  twelve  per 
cent.- and  it  will  accumulate  in  the  ensuing  year  $288,  just 
four  times  $72.  Thus  the  value  of  the  income  at  twelve 
per  cent,  is  four  times  greater  than  at  six  per  cent, 
whether  it  be  invested  in  land,  or  whether  it  be  reloaned 
on  interest.  With  interest  at  twelve  per  cent,  per  annum 
the  capitalist  possesses  power  to  monopolize  property 
four  times  greater  than  with  interest  at  six  per  cent,  per 
annum.  The  centralizing  power  of  money  increases  in 
geometrical  proportion  to  the  rate  of  interest.  This  is  a 
practical  as  well  as  a  mathematical  truth  or  law ;  which 
is  constantly  operating  to  centralize  wealth  in  the  hands 
of  a  few  at  the  expense  of  the  producers. 


HIGH   INTEREST   LOWERS   PRICES.  161 


SECTION  XIV. 

TO  CHEAPEN  PRICES  BY  AN  UNJUST  KATE  OF  INTEREST 
AND  A  SCARCITY  OF  MONEY,  IS  BUT  TO  CHEAPEN  THE 
LABOR  OF  ALL  PRODUCERS,  AND  GIVE  THEIR  EARN- 
INGS TO  CAPITALISTS  WITHOUT  AN  EQUITABLE  EQUI- 
VALENT. 

When  low  prices  are  paid  for  labor,  the  prices  of  pro- 
ducts are  proportionally  low.  It  is,  therefore,  generally 
supposed  that  the  laborer  can  as  readily  procure  all  need- 
ful supplies  when  labor  is  at  a  low  price,  as  when  it  is  at 
a  high  one.  But  the  articles  whose  price  is  diminished 
by  the  lowering  of  labor,  are  the  productions  of  labor ; 
and  the  producing  classes  suifer  great  injury  from  this 
depression  of  both  their  labor  and  products. 

The  following  illustration  will  exhibit  the  advantage  of 
high  prices  for  labor.  A  man  raises  a  hundred  bales  of 
cotton,  sends  them  to  market,  and  receives  three  and  a 
half  cents  per  pound.  A  laborer  in  New  York  receives 
fifty  cents  a  day  for  his  labor ;  with  a  day's  work  he  can 
purchase  fourteen  pounds  of  cotton.  If  labor  be  at  a  dol- 
lar per  day,  and  cotton  at  seven  cents  per  pound,  with  a 
day's  labor  he  can  purchase  the  same  quantity.  If  labor 
rise  to  a  dollar  and  fifty  cents  a  day,  and  cotton  to  ten 
and  a  half  cents  per  pound,  a  day's  labor  will  still  pur- 
chase fourteen  pounds  of  cotton.  Thus  far  we  do  not 
observe  the  difference  of  price  to  have  any  influence  upon 
the  ability  of  the  laborer  to  purchase  ;  but  we  have  yet 
to  notice  the  condition  of  that  class  of  producers  who 
raise  the  cotton  at  the  first  price,  three  and  a  half  cents 
per  pound.  After  paying  for  the  use  or  rent  of  the  plan- 
tation one-half  the  price  at  which  a  loan  of  money  can  be 
obtained,  say  three  or  four  per  cent,  interest  on  the  cost 
of  the  plantation,  they  do  not  earn  fifty  cents  a  day,  but, 


162  HIGH   INTEREST   LOWEKS    PKICES 

in  fact,  receive  little  or  no  compensation  for  their  labor. 
The  same  labor  and  land  are  required  to  produce  cotton 
when  it  brings  three  and  a  half  cents,  as  when  it  brings 
fourteen  cents  per  pound.  Suppose  a  workman  in  New 
York  to  buy  cotton  at  fourteen  cents  per  pound  ;  a  barrel 
of  flour  at  $8  ;  wheat  at  $1  50  per  bushel ;  potatoes  at 
40  cents  ;  corn  and  rye  at  80  cents  ;  brown  sugar  at  10 
cents;  coffee  at  12  cents;  boots  at  $3  a  pair;  shoes  at 
$1  ;  a  fur  hat  at  $3  ;  brown  sheeting  at  10  cents  per 
yard;  and  good  calico  at  12  cents  per  yard.  If  labor 
fall  to  50  cents  per  day,  and  he  have  full  employment,  to 
be  as  well  oif  as  when  labor  was  at  $2  per  day,  he  must 
buy  flour  at  $2  per  barrel ;  wheat  at  37£  cents  per  bushel ; 
potatoes  at  10  cents ;  corn  and  rye  at  20  cents ;  brown 
sugar  at  2£  cents  per  pound ;  coffee  at  3  cents ;  boots 
at  75  cents  per  pair ;  shoes  at  25  cents  ;  a  hat  at  75  cents  ; 
brown  sheeting  at  2 £  cents  per  yard;  good  calico  at  3 
cents  ;  and  everything  else  in  proportion.  Travelling 
expenses,  rents  and  taxes,  must  be  diminished  three-quar- 
ters. All  the  necessaries  of  life  must  be  reduced  in  price 
three-quarters,  or  the  laborer  who  is  out  of  debt  will  not 
be  as  well  off  when  labor  is  at  fifty  cents  per  day,  as 
when  it  is  at  two  dollars  per  day. 

But  suppose  one  class  of  the  laborers  to  buy  at  these 
low  prices,  what  will  the  producers  of  wheat,  rye,  corn, 
etc.,  receive  for  their  labor  ?  The  reason  that  the  laborer 
can  buy  as  much  cotton  when  labor  is  at  fifty  cents  per 
day,  as  when  it  is  at  two  dollars,  is,  that  he  buys  a  fellow- 
laborer's  products  at  a  price  which  will  not  pay  a  cent  a 
day  for  the  toil  of  producing  them.  So  when  the  prices 
of  labor  are  reduced  in  this  ratio,  laborers,  as  a  body,  are 
unable  to  provide  themselves  with  the  necessaries  of  life. 
The  reduction  of  the  prices  of  labor  and  products, 
consequent  upon  a  scarcity  of  money  and  a  rise  of  inte- 
rest, forces  producers  and  merchants  to  suffer  great  losses, 
because  the  diminution  of  the  prices  of  products  does  not 


TO   THE   LOSS   OF   PRODUCERS.  163 

diminish  the  amount  of  their  debts,  nor  their  legal  obliga- 
tions to  pay  them ;  while  the  capitalists  who  own  these  debts 
will  compel  laborers  and  owners  of  land  and  products  to 
sell  double,  treble,  and  quadruple  the  quantity  of  these, 
to  obtain  money  to  satisfy  the  debts.  Thus  wealth  passes 
with  great  rapidity  into  the  hands  of  a  few  capitalists. 
If  the  merchant  has  bought  goods  at  as  low  a  price  as 
they  can  be  afforded  by  the  manufacturer,  it  is  no  safe- 
guard against  loss  by  the  fall  of  goods  in  the  market,  be- 
cause the  market  price  of  the  goods  does  not  depend 
upon  the  labor  necessary  to  their  production,  but  upon, 
the  ever-varying  value  of  the  dollar.  Our  laws  make  th« 
dollar  the  real  value,  and  producers  and  ah1  kinds  of  pro 
perty  are  controlled  by  its  power. 

The  objection  is  often  urged,  that  to  make  money 
plenty  would  destroy  the  value  of  products.  But  how 
would  or  could  it  destroy  their  value,  to  allow  the  needy 
to  earn  the  means  to  purchase  them  ?  Will  not  a  starv- 
ing people  buy  products  ?  Does  any  one  suppose  that 
the  people  of  Ireland  would  live  upon  their  present  scanty 
food,  if  their  labor  would  afford  them  the  means  of  pur- 
chasing more  and  better  ?  Was  there  ever  a  bad  market 
for  products  when  labor  was  receiving  what  are  called 
high  prices,  or  a  good  market  when  labor  was  at  a  low 
price  ?  The  market  is  made  poor  by  the  inability  of  the 
laboring  community  to  earn  enough  to  make  purchases. 
If  labor  were  well  paid,  the  market  would  always  be 
good,  and  the  laborer,  assured  of  a  just  reward,  would 
work  cheerfully. 

Large  production,  at  a  fair  price,  gives  a  better  com- 
pensation to  producers,  than  half  production  at  double 
price.  The  families  of  producers  require  as  many  pro- 
ducts for  their  own  consumption  when  the  crops  are 
diminished  one-half,  and  their  price  is  doubled,  as  when 
products  are  abundant.  The  producers  cannot  then  spare 
a  sufficient  quantity  to  sell  for  their  usual  profits,  even  at 


164     »       VOLUNTARY  AGREEMENT 

the  increased  price,  and  capital  makes  the  same  requisi- 
tion upon  their  labor  for  rent  or  interest  as  if  their  crops 
were  abundant. 


SECTION    XV. 

VOLUNTARY    AGREEMENT    NO    TEST   OF    A    JUST   RATE    OP 
INTEREST. 

The  laws  do  and  ought  to  restrict  some  contracts 
and  give  freedom  in  others.  Restrictions  should  apply 
to  transactions  upon  a  wrong  basis,  and  those  made  upon 
a  right  one  should  be  entirely  free.  Agreements  founded 
upon  a  just  basis  would  naturally  be  mutually  beneficial 
to  the  parties  contracting  them,  but  no  agreements 
founded  upon  a  wrong  one  can  ever  do  equal  justice. 

Lotteries  and  various  kinds  of  gambling  are  rightly 
prohibited  by  law,  although  the  buying  and  selling  of 
lottery  tickets,  and  betting  on  games  of  cards,  are  volun- 
tary transactions.  If  mere  voluntary  agreement  makes 
contracts  just,  why  do  the  laws  annul  those  made  in 
gambling,  while  they  enforce  the  fulfilment  of  other  less 
voluntary  agreements  ?  A  man  without  property  must 
become  a  pauper  unless  he  agree  to  work  for  others,  or 
have  the  property  of  others  to  work  upon.  He  is  not  as 
free  in  his  contracts  as  the  gambler,  in  whose  case  there 
is  no  such  necessity ;  for  the  latter  must  have  money  or 
property  to  stake,  or  others  will  not  bet  with  him.  The 
only  reason  for  making  gambling  contracts  void  in  law, 
is,  that  no  equivalent  is  rendered  to  losers  for  what  is 
gained  by  winners.  If,  then,  wealth  is  the  product  of 
labor,  and  it  passes  into  the  hands  of  a  few  capitalists  by 
agreements  less  voluntary  than  betting  and  buying 
lottery  tickets,  is  not  the  former  even  more  contrary  to 
justice  than  the  latter?  Wrongs  of  this  kind  to  the 
laboring  classes  are  surely  as  greatly  to  be  deprecated  as 


NO   TEST   OF   A   JUST   BATE.  165 

those  to  gamblers ;  and  as  no  mutual  agreements  -will 
ever  make  gambling  just,  so  no  mutual  agreements 
founded  on  a  wrong  money  standard  can  ever  be  fair  and 
equal. 

If  R.  be  a  hatter,  and  T.  a  shoemaker,  the  products 
of  their  labor  must  be  exchanged,  in  order  to  supply 
both  their  families  with  hats  and  shoes.  If  X.  hold  the 
medium  by  which  this  exchange  must  be  effected,  and  by 
its  power  and  use  can  obtain  without  labor  more  hats  and 
shoes  from  R.  and  T.  than  they  can  together  retain  as 
the  reward  of  their  labor,  X.  evidently  holds  an  unjust 
power  over  them  and  their  products.  R.  and  T.  are  not 
only  obliged  to  exchange  their  hats  and  shoes  with  each 
other,  but  are  also  obliged  to  exchange  them  for  every 
necessary  of  life,  and  even  for  the  materials  out  of  which 
the  hats  and  shoes  are  manufactured.  They  cannot  make 
these  exchanges  without  an  agreement  with  X.  for  the 
use  of  the  legal  medium.  Neither  the  shoemaker  nor 
the  hatter  can  refrain  from  the  use  of  money  as  a  man 
ean  from  gambling  ;  and,  under  the  operation  of  the  pre- 
sent monetary  system,  by  using  it  they  are  certain  to 
lose  the  greater  share  of  their  surplus  hats  and  shoes. 
They  do  not  even  stand  the  same  chance  for  winning  by 
their  labor  that  the  gambler  does  by  gambling,  for  the 
dice  may  turn  in  his  favor,  but  a  rapidly  accumulating 
power  will  never  turn  in  favor  of  producers.  When 
money  shall  be  rightly  instituted,  and  a  just  rate  per  cent, 
interest  maintained,  agreements  among  R.,  T.  and  X. 
will  naturally  award  to  each  his  equitable  share  of  pro- 
ducts ;  but  until  this  medium  of  exchange  is  rectified,  the 
legal  rights  of  property  must  continue  at  variance  with 
actual  justice.  The  income  power  will  absorb  what  the 
producing  power  earns,  and  no  voluntary  agreements 
according  to  demand  and  supply,  can  prevent  this  result; 
for  the  suffering  is  caused  by  injustice  in  the  laws,  ami 
not  by  faults  in  the  agreements. 


166  VOLUNTARY  AGREEMENT 

•Public  opinion  appears  to  lean  toward  less  legal  restraint 
upon  trade.  This  would  be  well,  if  the  foundation  of  trade 
were  made  just.  But  first  to  fix  upon  an  unjust  money 
basis,  and  then  to  make  laws  enforcing  the  fulfilment  of 
voluntary  agreements  made  upon  it,  is  first  to  establish  an 
evil,  and  then  trust  to  a  competition  in  doing  the  evil  to 
produce  a  good.  It  makes  the  grossest  corruption  legal, 
and  gives  it  the  greatest  freedom.  But  financiers  assert 
that  laws  cannot  be  enacted  which  Avill  regulate  the  rate 
per  cent,  interest,  and  thus  keep  money  at  a  uniform 
value  ;  and  that  the  rate  per  cent.,  like  the  market  value 
of  commodities,  can  only  be  regulated  by  supply  and 
demand.  Under  this  law  of  supply  and  demand,  agree- 
ments according  to  the  necessity  of  the  borrower  and 
the  avarice  of  the  lender,  are  considered  tests  of  a  just 
rate  of  interest,  and  must  regulate  the  standard  by  which 
all  values  are  determined.  Under  this  system,  directors 
and  the  favored  few  borrow  money  from  banks  at  five, 
six,  or  seven  per  cent,  per  annum,  and  lend  it  at  three, 
four  or  five  per  cent,  a  month ;  and  if  mutual  agreement 
makes  justice,  all  these  rates  are  equally  just ;  although 
one  class  pays  from  six  to  ten  times  more  than  the  other, 
and  the  favored  class  gains  the  difference  by  a  mere  ex- 
change of  paper,  without  in  any  way  benefiting  the  suf- 
ferers. A  broker  borrows  money  from  a  bank  at  the 
rate  of  six  per  cent,  per  annum,  and  lends  it  on  the  same 
day  to  a  merchant  who  is  "  cornered  "  at  one  per  cent,  a 
day — just  sixty  times  as  much — and  according  to  this 
great  law  of  supply  and  demand,  as  it  is  often  called, 
each  party  pays  exactly  the  right  and  just  rate  per  cent,  in- 
terest. The  broker  demands  the  money  from  the  bank,  and 
the  bank  supplies  him  at  the  rate  of  six  per  cent,  per  an- 
num :  but  the  merchant  demands  the  money  from  the 
broker,  and  the  broker  supplies  him  at  the  rate  of  365  per 
cent,  per  annum.  If  a  man  fall  into  the  water  and  de- 
mand help  to  get  out,  the  person  who  supplies  assistance 


NO  TEST  OF  A  JCST  RATE.  167 

has  a  perfect  right,  according  to  this  law  of  supply  and 
demand,  to  take  all  the  property  a  man  may  own ;  for 
who  but  a  miser  would  not  give  all  his  wealth  to  save  his 
life  ?  In  Europe,  laborers,  by  voluntary  agreement,  work 
for  ten  or  fifteen  cents  a  day,  and  are  often  thankful  to 
get  work  at  these  rates  to  save  themselves  and  their  chil- 
dren from  starvation.  If  mere  freedom  of  agreement,  or 
supply  and  demand,  constitute  the  justice  of  contracts, 
independently  of  their  basis,  these  prices  must  be  a  stand- 
ard whereby  to  estimate  the  true  value  of  labor,  which, 
therefore,  would  depend  on  the  price  the  capitalist  would 
pay  for  it,  and  not  on  its  utility. 

This  wrong  basis  of  contracts  also  causes  a  competition 
among  laborers  themselves  according  to  their  necessities ; 
the  tendency  of  which,  under  present  systems,  is  to  re- 
duce the  price  of  labor  to  the  mere  subsistence  of  the 
laborer.  But  the  reverse  of  this  is  true  of  competition  in 
lending  money.  Whenever  a  strife  occurs  in  the  money 
market,  and  one  bank  begins  to  run  upon  another,  and 
capitalists  strive  for  the  highest  rate  per  cent,  for  the 
use  of  their  money,  the  tendency  is  at  once  to  increase 
the  rates  of  interest.  The  greater  the  strife  the  higher 
the  interest  rises,  until  the  whole  business  of  the  country 
is  paralyzed  ;  for  the  rise  of  interest  increases  indebted- 
ness, destroys  credit,  diminishes  the  wages  of  labor,  and 
throws  it  out  of  employment. 

It  is  probable  that  every  man,  woman,  and  even  every 
child  over  five  years  old,  in  this  nation,  has  seen  and 
handled  more  or  less  gold,  silver  or  copper  money.  If  we 
tell  the  public  that  the  legal  power  of  money  is  the  great- 
est, the  most  controlling  and  influential  of  all  earthly 
powers ;  that  it  determines  the  rate  per  cent,  that  shall 
be  paid  for  the  use  of  all  property  ;  that  it  decides  who 
shall  be  born  in  the  lap  of  wealth,  and  live  in  luxury,  and 
who  shall  be  born  in  poverty  and  want,  and  be  subjected 


163  VOLUNTARY  AGREEMENT. 

to  a  life  of  the  severest  toil  and  servitude  in  order  to  sub- 
sist ;  that  it  also  rules  governments  and  the  destinies  of 
nations,  and  that  its  present  power  is  directly  opposed  to 
virtue  and  in  favor  of  vice ;  if  we  tell  the  people  all  this, 
we  shall  only  tell  them  the  truth.  But  will  they  believe 
us  ?  Will  they  not  say,  "  We,  and  our  children,  and  our 
fathers  before  us,  have  seen  and  handled  more  or  less 
money  all  our  lives,  and  we  have  never  seen  in  it  any  such 
power."  It  is  true  they  have  no  more  seen  this  power 
than  they  have  seen  the  law  of  gravitation,  because  it  is 
just  as  invisible ;  yet  they  have  as  sensibly  felt  the  effects 
of  the  centralizing  power  of  money  as  they  ever  have 
the  effects  of  the  law  of  gravitation.  People  work  hard 
all  their  lives,  without  considering  by  what  laws  the  pro- 
ducts of  their  labor  are  governed,  and  they  are  taught  to 
believe  that  as  the  mining  and  coining  of  the  gold  and 
silver  are  the  products  of  labor,  that  this  labor  performed 
is  what  constitutes  the  value  of  the  money.  These  coins 
are  only  the  material  of  money,  they  are  not  its  power. 
The  power  of  money  is  to  collect  a  per  centage  income, 
and  this  is  a  legal  power,  and  not  a  material  thing.  This 
power  is  the  product  of  law,  and  not  the  product  of  labor. 
Yet  this  invisible,  legal  power  of  money  as  much  controls 
and  centralizes  the  productions  of  labor,  as  the  mind 
directs  what  the  physical  man  shall  perform.  By  its 
unjust  power  the  wealthy  few  govern  the  destinies  of 
man.  When  they  lend  money  liberally  to  the  public,  at 
what  is  called  a  low  rate  of  interest,  it  sets  the  multitude 
at  active  production^  so  that  they  are  as  busy  as  bees  in 
a  warm  summer  morning.  But  when  the  few  call  in 
their  loans,  and  raise  the  rate  of  interest,  the  producing 
classes  are  paralyzed,  like  the  bees  when  the  thermome- 
ter is  at  zero.  The  financial  skill  of  a  few  Rothschilds, 
wielding  the  power  of  money,  as  much  determines  where 
the  wealth  of  a  nation  shall  be  centralized,  as  the  captain 
and  pilot  of  a  steamship  direct  at  what  point  or  whaif 


THE    LAW    OF   INTEREST.  160 

the  passengers  shall  be  landed.  Not  only  the  producing 
public,  but  the  government  itself,  is  about  as  much 
directed  by  a  few  money-lenders  as  the  crew  of  the  ship 
by  the  captain  and  pilot.  If  the  commanders  of  the  ship 
run  her  upon  the  breakers,  they  endanger  their  own  pro- 
perty and  lives  as  well  as  those  of  the  passengers ;  but 
the  managers  of  this  financial  power,  by  calling  in  their 
money  and  reloaning  it  at  higher  rates  of  interest,  not 
only  cripple  the  government,  and  compel  it  to  sell  its 
own  credit  at  usurious  rates  of  interest,  but  they  also 
paralyze  the  business  of  the  producing  classes,  deprive 
them  of  the  means  of  subsistence,  drive  multitudes  of 
them  into  distressing  poverty,  despondency  and  suicide, 
and  by  thus  wrecking  the  public  they  gather  large  gams 
out  of  the  spoils.  Money,  as  now  instituted,  is  the  most 
deceitful  power  that  ever  has  been  or  can  be  established. 
The  groundwork  for  its  first  institution  is  false,  and  sub- 
sequent laws  for  the  regulation  of  such  money  can  no 
more  remedy  its  evil  power,  than  a  good  house  can  be 
built  on  a  foundation  previously  laid  upon  a  guicksand, 
where  every  tide  of  the  ocean  would  cause  some  part  of 
the  foundation  to  change  its  position. 


SECTION  XVI. 

THE    LAW   OF    INTEREST     ON    MONET   AN    ACCUMULATIVE, 
NOT   A   PRODUCING   POWEE. 

Money  loaned  is  universally  spoken  of  as  bearing  in- 
terest ;  but  this  is  a  mistaken  idea.  It  is  the  borrower's 
obligation,  and  not  the  lender's  money,  that  bears  in- 
terest. It  is  generally  believed  that  borrowers  have  the 
use  of  money  for  the  time  that  they  hire  it,  just  as  a 
tenant  has  the  use  of  a  farm  for  the  time  that  he  rents  it. 
This  also  is  a  mistaken  idea,  for  the  farm  is  usable  in  the 
8 


170  THE   LAW    OF   INTEREST 

tenant's  hands,  but  money  is  not  usable  in  the  borrower's 
hands.  If  a  man  borrow  $10,000,  and  give  to  the  lender 
his  note  payable  in  one  year,  with  seven  per  cent,  in- 
terest, at  the  end  of  the  year  he  will  owe  to  the  lender 
the  principal  and  $700  interest.  Now  what  does  he 
have  to  use  during  the  year  out  of  which  he  is  to  gain 
the  interest?  It  certainly  cannot  be  the  $10,000  ;  for  if 
he  keep  the  money  in  his  own  pocket,  there  can  be  no 
increase  in  quantity,  and  at  the  end  of  the  year,  he  will 
not  have  enough  by  $700  to  pay  the  debt.  But  the 
borrower's  obligation  in  the  lender's  pocket  has  increased 
the  debt  $700.  The  $10,000  must  enable  the  borrower 
to  have  something  else  to  use  for  the  year,  or  certainly 
he  would  not  borrow  the  money,  and  agree  to  pay  the 
interest.  As  soon  as  he  has  the  money  in  his  possession, 
he  either  pays  a  debt  previously  contracted,  or  buys 
land,  or  some  kind  of  goods,  wares  or  merchandise  with 
it.  If  he  buys  land,  he  has  the  use  of  it  for  the  year  by 
paying  $700  rent.  If  he  is  a  manufacturer,  and  has  been 
disappointed  in  the  sale  of  his  goods,  and  owes  $10,000 
that  has  become  due,  he  pays  the  debt,  and  this  enables 
him  to  keep  $10,000  worth  of  his  goods  for  the  year.  It 
gives  him  a  year's  time  to  sell  these  goods,  and  turn 
them  into  money  to  pay  the  debt.  Thus  the  so-called 
interest  on  money  is  the  rent  that  he  pays  for  the  use  of 
the  goods  for  a  year :  it  is  not  paid  for  the  use  of  the 
money.  The  money  and  the  interest  are  both  re- 
presentatives of  value.  The  value  is  in  the  goods,  or 
land,  and  the  labor  that  makes  the  property  productive. 
The  money  is  always  dead,  and  strictly  speaking,  people 
never  pay  a  fraction  of  interest  for  its  use.  The  practi- 
cal effect  of  the  per  centage  called  interest,  is  simply  to 
determine  the  per  centage  rent  of  property. 

A  tree  bears  fruit,  because  the  fruit  grows  out  from 
the  vitality  of  the  tree.  But  money  is  authorized  and 
organized  by  human  laws,  and  human  laws  do  not  or- 


NOT   A    PRODUCING    TOWKK.  171 

ganize  or  create  vitality,  therefore  money  is  of  necessity 
a  dead  power,  and  has  no  vital  energy  to  produce  other 
money.  Money  loaned  accumulates  by  interest,  but  the 
money  produces  no  interest.  All  the  money  in  this 
nation  will  be  kept  over  from  to-day  until  to-morrow,  and 
will  bear  no  interest  to  those  who  keep  it ;  it  will  gain 
nothing  by  interest  for  him  who  may  keep  it  a  week, 
month,  year,  or  any  other  longer  or  shorter  time.  All 
the  money  in  the  country  is  barren  of  interest  in  the 
hands  of  somebody  to-day,  and  will  be  barren  of  interest 
in  the  hands  of  somebody  to-morrow.  It  may  change 
owners  a  hundred  times,  but  it  is  always  a  dead  power 
in  the  hands  of  somebody.  Borrowers,  whether  for  a 
longer  or  shorter  period,  always  pay  out  the  money  as 
soon  as  possible ;  they  do  not  keep  it.  The  money  is 
not  usable  as  property,  it  is  not  susceptible  of  being  im- 
proved by  labor,  nor  is  it  competent  in  itself  to  supply 
any  want  of  man,  or  to  make  any  improvement.  It  is 
dead  in  their  hands,  and  they  at  once  part  with  it  for 
something  which  is  usable,  such  as  materials  that  can  be 
improved,  or  houses  that  will  shelter  themselves  and 
their  families,  or  lands  upon  which  they  can  raise  crops, 
or  goods,  wares  and  merchandise  which  they  can  use,  or 
can  exchange  for  a  profit. 

As  we  have  said,  the  per  centage  interest  that  borrowers 
agree  to  pay  for  the  use  of  money,  simply  determines 
what  per  centage  rent  they  shall  pay  for  the  actual  use  of 
a  certain  amount  of  property  for  a  given  period.  Bor- 
rowers use  the  property,  not  the  money ;  and  from  the 
property  they  must  produce  or  gain  the  means  to  pay  the 
interest.  If  F.  be  a  farmer,  and  borrow  from  A.  $1,000  at 
seven  per  cent.,  F.  must  raise  one  hundred  and  forty 
bushels  of  corn,  and  sell  it  at  fifty  cents  a  bushel  to  pay 
the  yearly  interest  of  seventy  dollars.  It  is  then  the  pro- 
ductiveness of  F.'s  farm  coupled  with  F.'s  labor,  that  pro- 
duces the  money  to  pay  the  interest.  The  thousand  dol- 


172  THE   LAW    OF   INTEBEST 

lars  lent  by  A.  to  F.  do  not  produce  anything  :  but  the 
money,  by  a  legal,  arbitrary  power,  takes  one  hundred 
and  forty  bushels  of  corn  from  F.,  and  appropriates 
them  to  A.'s  use.  If  A.'s  thousand  dollars  possessed 
vital  instead  of  legal  power,  and  could  hire  land,  buy  the 
seed,  plant,  cultivate,  gather,  shell  and  sell  the  corn,  it 
would  then  actually  produce  for  A.  what  the  money  now 
legally  compels  F.  to  produce  for  him.  But  as  no 
human  law  can  make  the  dollar  a  naturally  productive 
thing,  it  is  impossible  to  gain  wealth  by  finance,  unless 
the  labor  of  others  produces  what  is  gained  by  the 
financiers. 

Money,  then,  earns  for  its  owner  by  an  accumulative 
power  ;  by  a  power  to  gather  things  already  produced, 
and  not  by  a  natural  power  of  growth,  like  that  contained 
in  the  germ  of  wheat  or  grain.  Where  this  power  to 
accumulate  by  interest  is  made  greater  and  more  rapid 
than  the  natural  power  of  production  by  labor,  this  law 
of  interest  becomes  a  most  powerful  engine  of  evil.  It 
gathers  into  the  hands  of  a  few  capitalists  the  productions 
of  labor,  and  often  deprives  the  producers  of  the  neces- 
saries of  life. 

All  nations  have  considered  money  to  be  wealth,  be- 
cause it  possesses  this  power  to  accumulate  j  but  whether 
made  of  gold  or  of  paper,  it  really  contains  a  very  small 
amount  of  actual  wealth.  The  laws  make  money  a  legal 
equivalent  for  all  property,  and  give  it  the  power 
to  accumulate  by  interest.  They  make  $100,000,  loaned 
at  six  per  cent,  interest,  earn  for  the  owner  $6,000  a  year, 
without  labor  on  his  part,  while  the  labor  of  twenty 
men,  for  three  hundred  days  in  the  year,  at  a  dollar  a 
clay,  will  earn  no  greater  sum.  The  labor  of  twenty  men, 
for  a  year,  would  make  a  visible  improvement  on  a 
farm  ;  but  the  interest  makes  no  visible  improvement  on 
the  money  loaned. 

Nothing  has  prevented,  nor  now  prevents,  the  full  em- 


NOT   A   PRODUCING    POWER.  173 

ployment,  and  adequate  compensation  of  labor,  but 
the  monopoly  of  money,  and  unjust  rates  of  in- 
terest. All  nations  and  all  political  parties  profess  to 
legislate  for  the  protection  of  industry,  but  in  reality, 
they  have  from  time  immemorial  legislated  to  support 
exorbitant  interest  on  money.  And  since  the  interest  on 
money  governs  the  rent  or  use  of  all  property,  legisla- 
tion, by  fixing  high  rates  of  interest,  has  always  sup- 
ported and  increased  capital,  and  depressed  labor.  This 
enormous  per  centage  interest  on  money  has  reversed  the 
true  order  of  nature ;  for  the  increase  of  the  earth  is  the 
natural  reward  of  labor,  but  the  too  great  income  power 
gives  the  reward  to  those  who  neither  plant  nor  water, 
and  often  starves  the  laborers  on  the  soil  which  their  own 
hands  have  cultivated.  By  this  exorbitant  interest,  the 
bounties  of  God  are  made  a  sacrifice  on  the  altar  of  Mam- 
mon, and  the  poor  are  oppressed  because  they  are  poor, 
and  in  their  toil  there  is  little  salvation  from  want  and 
misery.  This  income  power,  established  by  the  laws  of 
nations,  has  not  in  the  least  altered  the  laws  of  pro- 
duction. Production  has  always  been  made  by  labor 
upon  the  soil,  and  by  mechanics  and  artisans ;  but  the  unjust 
income  power  is  a  mere  human  contrivance,  by  which 
actual  producers  are  made  slaves  to  non-producing  capi- 
tal, and  by  which  the  few  monopolize  what  the  many 
produce  by  their  labor. 

It  is  impossible  for  the  producers  of  a  nation  to  pay 
three,  four,  or  five  per  cent.,  or  more,  for  the  yearly 
use  of  property,  and  also  furnish  themselves  with  the  com- 
forts and  conveniences  of  life.  All  the  per  centage  col- 
lected for  the  rent  on  property,  or  as  the  interest  on 
money,  must  be  paid  by  sales  of  the  yearly  productions 
of  labor,  which  remain  over  and  above  the  support  of 
the  producers.  If  a  very  few  rich  men,  in  any  civilized 
nation,  should  live  frugally,  and  their  posterity  should  do 
the  same,  in  the  course  of  a  few  generations  they  would 


174:  THE   LAW    OF   INTEREST. 

reduce  to  poverty  nearly  every  other  individual  in  the 
country.  Consequently,  under  present  monetary  laws, 
extravagance  in  the  rich,  and  the  frequent  inefficiency 
and  imbecility  of  their  children,  are  great  advantages  to 
producers.  The  second  evil  is  necessary  to  modify  the 
overwhelming  power  of  the  first. 

The  income  or  interest,  legally  fixed  and  maintained 
upon  money,  governs  not  only  the  rent  of  property,  and 
the  dividends  on  stocks,  but  also  the  entire  general  in- 
come on  all  other  things,  because  the  interest  on  money 
is  the  standard.  This  income  is  a  yearly  tax  levied  upon 
producers,  which  at  the  present  rates  is  enormous  and 
oppressive.  Laws  may  be  made  to  prevent  the  entail- 
ment  of  property,  to  compel  banks  to  divide  yearly  or 
half-yearly  their  earnings,  and  various  other  laws  may  be 
made  to  prevent  the  unjust  accumulation  of  property  in 
the  hands  of  the  few,  and  to  give  the  laborer  what  he 
really  earns ;  but  all  these  will  be  of  little  avail  to  amelio- 
rate the  wrong.  But  as  the  per  centage  interest  is  dimi- 
nished, producers  will  be  benefited;  and  when  it  is  re- 
duced and  maintained  at  the  just  rate,  the  laboring  classes 
will  receive  the  chief  part  of  their  own  products.  The 
currency  is  the  national  standard  by  which  the  value  of 
the  labor  and  products  of  all  citizens  is  estimated,  and 
all  are  obliged  to  use  it  and  found  their  contracts  upon 
it.  If  a  fundamental  law,  like  that  of  the  rate  of  interest 
on  money,  be  made  just,  it  will  be  easily  supported  by 
other  just  laws;  but  if  it  be  made  unjust,  it  will  be  diffi- 
cult to  support  it,  for  all  the  laws  which  sustain  it  must 
necessarily  be  unjust.  A  man  who  utters  a  falsehood 
must  support  it  by  other  false  assertions.  A  hundred 
lies  may  be  required  to  give  the  first  the  semblance  of 
truth.  So  if  a  nation  fix  an  unjust  standard  of  value, 
every  law  which  sustains  that  standard  must  be  unjust. 
An  unjust  standard  has  been  used  from  the  earliest  ages 
of  which  we  have  a  record ;  but  the  long  use  of  it  will 


A   JUST   RATE   OF   INTEREST.  175 

never  make  it  just,  more  than  the  long  use  of  a  falsehood 
with  a  hundred  lies  to  support  it,  will  make  the  false- 
hood truth ;  or  the  long  use  of  evil  make  the  evil  good. 
When  governments  make  money  unlimited  in  quantity, 
at  a  just  rate  of  interest,  laws  will  be  simple,  debts  paid, 
labor  rewarded,  and  peace  and  happiness  will  pervade 
the  country.  Money  will  be  easily  obtained  in  exchange 
for  labor,  instead  of  labor  being  superabundant,  and 
money  scarce.  Non-producing  capital — i.  e.,  anything 
which  requires  the  expenditure  of  labor  to  make  it  pro- 
duce— should  bear  a  low  interest.  Actual  production 
will  then  receive  a  suitable  reward. 


SECTION   XVII. 

ESTIMATE    OF   A   JTJST   RATE   OF   INTEREST. 

From  what  has  been  said  of  unjust  and  fluctuating 
rates  of  interest,  it  must  not  be  inferred  that  money 
loaned  should  bear  no  interest;  for  the  accumulative 
power  of  money  is  as  essential  to  its  existence  as  food  to 
the  support  of  life.  Without  this  power  money  would 
not  represent  production,  and,  consequently,  could  not 
be  made  an  equivalent  in  payment  either  for  labor  or  pro- 
ductive property,  and  therefore  could  not  be  maintained 
as  a  medium  of  exchange.  We  are,  then,  seeking  no 
extreme  measures,  but  that  just  rate  of  interest  which 
shall  secure  to  the  whole  people  the  greatest  good.  We 
do  not  advocate  the  annihilation  of  interest,  but  we  urge 
that  the  amount  should  not  be  so  great  as  to  oppress  the 
laborer  whose  toil  produces  every  necessary  of  life,  and 
even  the  material  for  the  medium  of  exchange. 

The  rate  of  interest  fixed  upon  money  determines 
what  proportion  of  the  value  produced  by  labor  shall  be 
awarded  to  the  capitalist  for  the  use  of  his  capital,  and 
what  proportion  the  laborer  shall  receive  for  his  toil  in 


176  ESTIMATE   OF  A 

making  the  production.  It  is,  therefore,  important  to 
ascertain  what  per  centage  the  people  of  a  nation  can  pay 
to  capital,  and  still  receive  a  due  reward  for  their  labor. 
To  arrive  at  a  just  conclusion,  we  must  form  ac  estimate 
on  a  large  scale,  and  for  a  term  of  years.  Take  the  fol- 
lowing as  such  an  estimate  :  Suppose  a  country  lay  off 
our  coast  equal  in  every  respect  to  that  of  the  United 
States,  but  in  its  primitive  wildness.  Allow  those  classes 
of  people  whose  labor  makes  all  improvements  to  have 
the  use  of  the  United  States  in  their  present  condition, 
with  their  cities,  railroads,  canals,  farms,  goods,  wares 
and  merchandise,  bank,  State,  and  other  stocks,  money, 
etc.,  for  the  term  of  seventy  years.  At  the  close  of  this 
period,  they  are  to  return  the  property  uninjured  by  use, 
perishable  articles  replaced  by  new  ones,  and  decayed 
buildings  and  machinery  repaired  and  renewed.  And 
for  the  use  or  rent  of  all  these,  they  are  meanwhile  to 
make  in  the  adjoining  new  country  every  improvement 
already  in  this  ;  cities,  railroads,  canals,  shipping,  improve 
farms,  make  money,  stocks,  etc.,  etc.,  and  render  the 
country  in  every  respect  equal  to  the  United  States.  At 
the  end  of  seventy  years  they  must  give  up  the  United 
States,  together  with  the  new  country  and  all  its  improve- 
ments, and  this  would  only  be  paying  for  the  use  of  the 
property  an  interest  half-yearly,  at  the  rate  of  one  per 
cent  per  annum.  We  will  repeat  the  length  of  tune  in 
which  money  doubles  at  certain  different  rates  of  interest} 
the  interest  being  paid  and  reloaned  half-yearly.  At  two 
per  cent,  per  annum,  it  will  double  in  about  thirty-five 
years ;  at  three  per  cent.,  in  less  than  twenty-four  years ; 
at  six  per  cent.,  in  a  little  less  than  twelve  years  ;  and  at 
seven  per  cent.,  in  a  little  more  than  ten  years.  If  the 
laboring  classes  can  make  as  many  improvements  in  a 
new  country  as  now  exist  in  this,  and  can  afford  to  give 
the  whole  improvement  for  the  use  or  rent  of  this  country 
for  ten  years,  seven  per  cent,  would  be  a  just  rate  of 


JUST    RATE   OF   INTEREST.  177 

interest.  If  the  people  require  twenty-three  and  a  half 
years  to  perform  this  labor,  beside  making  a  comfortable 
provision  for  themselves,  three  per  cent,  would  be  the 
just  rate;  if  thirty-five  years,  f\vo  percent.;  and  if  sixty- 
nine  and  a  half  years,  one  per  cent,  should  be  the  rate. 

Take  the  same  estimate  under  a  different  form.  Sup- 
pose all  species  of  property  in  the  country  to  receive  a 
fair  valuation,  and  its  owners  sell  it  on  a  credit  of  one 
hundred  years,  the  interest  or  rent  to  be  paid  half-yearly, 
at  the  rate  of  seven  per  cent,  on  the  amount  of  valuation. 
At  this  rate,  th6*purchasers  must  pay  every  ten  years  to 
the  sellers  a  value  in  interest  equal  in  amount  to  the  value 
of  the  whole  property  of  the  nation.  If,  however,  the 
property  were  sold  upon  the  same  credit,  bearing  an  in- 
terest of  one  per  cent.,  neai'ly  seventy  years  would 
elapse  before  the  purchasers  must  pay  to  the  sellers  an 
amount  in  interest  equal  to  the  value  of  the  principal. 

If  the  distinctions  between  the  value  of  gold  and  of 
paper  disappear  when  both  are  used  as  money,  it  follows 
that  the  value  of  gold  and  silver  money  cannot  be  regu- 
lated by  the  quantity  of  metal  in  each  piece,  any  more 
than  the  value  of  paper  money  could  be  regulated  by  the 
quantity  of  paper  in  each  bank-note.  The  power  of 
money  over  property  and  labor  is  increased  or  diminished 
just  in  proportion  to  its  accumulative  power,  hence  the 
only  possible  way  to  affix  a  true  value  to  money,  is  to 
regulate  a  right  rate  per  cent,  interest  for  its  use.  A 
nation  should  not  allow  any  money  to  circulate  that  is 
not  perfectly  good,  and  at  par,  and  also  a  legal  tender  in 
payment  for  debts  in  every  part  of  the  country.  Good 
money  is  a  representative  of  value,  and  must  be  perma- 
nently secured  by  property  that  possesses  intrinsic  value ; 
for  if  the  property  which  formed  the  basis  for  the  issue 
of  the  money,  should  cease  to  be  valuable,  the  money  of 
course  would  cease  to  represent  value,  and  would  be 
worthless,  except  for  the  actual  value  of  the  material  out 
8* 


178  BENEFICIAL   RESULTS    OF 

of  which  it  was  made.  Money  to  be  good  must  also  re- 
present production,  hence  it  must  always  be  susceptible 
of  being  loaned  for  a  rate  per  cent,  interest.  Kow,  as 
labor  in  any  useful  occupation  should  be  justly  compen- 
sated, so  also  the  necessary  labor  to  furnish  and  issue  the 
money  of  a  nation  should  be  fairly  remunerated  ;  and  the 
per  centage  interest  on  the  money  furnished  and  loaned 
by  an  Institution  established  by  the  Government  for  that 
purpose,  should  be  equivalent  to  pay  for  the  material 
and  labor  employed  in  producing  and  loaning  it.  Thus 
the  borrowers  of  the  money  would  pay  the  cost  of  the 
production  and  issue  (see  Part  II.,  A  True  Monetary 
System},  and  this  would  form  the  rate  per  cent,  inte- 
rest to  be  charged  by  any  subsequent  owners  of  the 
money  when  they  should  reloan  it.  Money  thus  organ- 
ized would  always  pay  for  its  own  support,  without  aid 
from  the  Government.* 


SECTION    XVIII. 

BENEFICIAL  RESULTS  TO    LABORERS  AND  MERCHANTS  FROM 
THE    REDUCTION    OF    THE   RATE    OF     INTEREST. 

It  may  be  said  that  the  reduction  of  the  interest  on 
money  would  cause  property  to  rise  in  price  in  proportion 
to  the  decrease  of  interest,  and,  therefore,  the  condition 
of  the  laborer  wrould  not  be  improved.  It  will  be  sup- 
posed that  if  the  market  value  of  property  should  rise 
in  proportion  to  the  decrease  of  interest,  speculators  and 
owners  of  property  would  be  the  gainers  by  the  reduc- 

*  The  two  modes  of  estimating  the  just  rate  of  interest,  set  forth 
in  this  chapter,  do  not  differ  in  their  result ;  but  the  author  considered 
the  latter  (which  is  taken  from  his  more  recent  writings)  the  final 
criterion ;  and  spoke  of  it  repeatedly,  during  the  last  winter  of  his 
life,  as  a  point  to  which  he  attached  great  importance. — [En.] 


A   REDUCED   RATE   OF   INTEREST.  179 

tion  ;  that  interest  being  reduced  from  seven  to  one  per 
cent.,  "V.'s  four  farms  (see  Section  I.)  would  rise  in  their 
market  value  from  $10,000  to  $70,000,  and  a  rent  of  one 
per  cent,  on  the  $70,000  would  be  $700 — precisely  the 
same  sum  as  seven  per  cent,  on  $10,000 — and  thus  the 
tenants  would  gain  nothing  by  the  lessening  of  the  inte- 
rest, but  V.  would  gain  by  the  rise  in  the  market  value  of 
his  farms.  By  looking  a  little  deeper  into  this  matter, 
we  shall  see  that  such  would  not  be  the  fact.  For,  if  V.'s 
farms  rise  to  $70,000  each,  and  A.,  B.,  C.  and  D.,  hire 
them  at  one  per  cent,  on  this  valuation,  that  is,  at  $700 
a  year  for  each,  which  V.  on  its  receipt,  loans  out  at  one 
per  cent.,  yearly  collecting  and  reloaning  the  interest,  it 
would  be  seventy  years  before  the  rent  and  its  accruing 
interest  would  buy  four  ofher  farms.  Hence  the  relative 
gain  of  the  laborers  by  lowering  the  rate  per  cent,  inte- 
rest, would  not  be  altered  by  any  rise  in  the  market  value 
of  the  farms.  To  show  this  yet  more  clearly,  suppose 
the  market  value  of  each  farm  increase  from  $10,000  to 
$70,000,  and  let  V.  instead  of  renting  sell  them,  and  loan 
out  their  proceeds  on  bond  and  mortgage  at  one  per 
cent,  per  annum,  yearly  collecting  and  reloaning  the  in- 
terest, it  would  still  be  seventy  years  before  the  interest 
would  equal  the  principal,  and  amount  to  $280,000  ;  and 
the  $280,000  gained  by  interest,  would  buy  for  V.  only 
four  farms  worth  $70,000  each  ;  whereas,  with  interest  at 
seven  per  cent.,  if  V.  should  sell  the  same  four  farms  at 
$10,000  each,  loaning  out  the  $40,000  proceeds  at  seven 
per  cent.,  and  yearly  collecting  and  reloaning  the  interest 
at  the  same  rate,  in  seventy-one  years  and  nine  months 
he  would  gain  $5,080,000,  which  would  buy  five  hundred 
and  eight  farms. 

Whether  property  rise  or  fall,  or  maintain  its  present 
price,  the  reward  of  labor  would  be  equally  increased  by 
the  diminution  of  interest.  Suppose  H.  has  a  lot  that 


180  ,  BENEFICIAL   RESULTS    OF 

cost  him  in  cash  $1,000,  and  builds  a  house  upon  it  cost- 
ing $1,000 — together  worth  $2,000.  Interest  on  money 
is  at  six  per  cent,  per  annum ;  therefore  to  make  the  pro- 
perty worth  the  money  it  cost,  H.  must  let  the  house  for 
$120  a  year,  clear  of  insurance,  repairs,  and  taxes.  Labor 
is  then  at  one  dollar  per  day.  Reduce  the  interest  on 
money  to  one  per  cent.,  and,  in  consequence  of  this  re- 
duction, let  the  lot  and  house  rise  to  six  times  their 
former  price — that  is,  from  $2,000  to  $12,000.  The  in- 
terest on  $12,000  at  one  per  cent,  would  be  $120,  the 
same  as  when  the  property  would  sell  for  but  $2,000. 
The  house  could  not  rise  from  $2,000  to  $12,000,  unless 
labor  should  rise  proportionally — that  is  from  one  dollar 
a  day  to  six  dollars  a  day.  The  same  amount  of  labor 
would  as  readily  build  the  house  at  one  time  as  another. 
With  labor  at  six  dollars  per  day,  the  tenant  could  pay 
the  $120  rent  with  twenty  days'  work;  whereas,  with 
interest  at  six  per  cent.,  and  labor  at  one  dollar  per  day, 
it  would  take  one  hundred  and  twenty  days'  labor  to  pay 
the  rent,  six  times  more  than  when  the  interest  on  money 
was  at  one  per  cent.  Now  suppose  the  change  in  inte- 
rest to  produce  no  effect  upon  property,  and  the  house  and 
lot  to  continue  worth  only  $2,000.  The  interest  on  the 
$2,000  at  one  per  cent,  would  be  $20.  If  property  did 
not  rise,  labor  would  not  rise,  because  it  would  require 
the  same  number  of  days'  labor  to  build  the  house,  and 
it  would  take  twenty  days'  labor  to  pay  the  rent — the 
same  number  of  days  that  it  would  if  the  property  should 
rise  to  $12,000. 

A  just  per  centage  on  money  being  established,  the  rise 
or  the  fall  of  property  would  not  affect  the  relative  posi- 
tions of  labor  and  capital.  If  property  should  rise  in 
price,  the  tenant  would  not  be  obliged  to  build  another 
house  for  the  use  of  one,  any  sooner  than  if  property 
should  fall  in  price.  He  could  pay  the  rent  in  the  one 


A   REDUCED   KATE   OF   INTEREST.  181 

case  as  easily  as  in  the  other,  and  with  the  same  amount 
of  labor  ;  but  a  change  in  the  rate  of  interest  would  im- 
mediately affect  him. 

The  amount  of  products  required  as  the  rent  of  land 
would  be  diminished  by  reducing  the  rate  of  interest. 
Suppose  G.  owns  a  farm  of  one  hundred  acres  of  wTell 
improved  land  worth  $100  per  acre.  H.  rents  this  farm 
at  seven  per  cent,  interest  on  its  cost,  and  consequently 
must  pay  to  G.  $700  a  year.  If  the  land  produce  twenty- 
five  bushels  of  wheat  to  the  acre,  and  wheat  be  worth  $1 
per  bushel,  H.  must  sow,  reap,  and  sell  the  products  of 
twenty-eight  acres,  and  pay  the  whole  proceeds  to  G.  as  the 
rent  of  one  hundred  acres  for  the  year.  -If  interest  were 
at  one  per  cent,  instead  of  at  seven,  the  rent  of  the  farm,  or 
of  the  $10,000  for  the  year  would  be  $100,  instead  of 
$700 ;  and  H.  would  be  obliged  to  cultivate  and  sell  the 
products  of  four  acres  only  to  procure  one  hundred  bushels 
of  wheat,  or  $100  to  pay  the  rent.  If  he  performed  the 
same  labor  when  interest  was  at  one  as  when  it  was  at 
seven  per  cent.,  he  would  retain  the  products  of  twenty- 
four  acres — i.  e.,  six  hundred  bushels  of  wheat  as  the 
surplus  earnings  of  his  labor,  instead  of  paying  them  to 
G.  for  the  use  of  capital.  The  reduction  of  the  rate  of 
interest  would  not  lessen  the  quantity  of  products,  nor 
decrease  their  value ;  it  would  only  give  a  larger  propor- 
tion to  producers.  If  G.  should  cultivate  his  own  farm, 
he  would  receive  the  whole  of  its  products  as  the  earn- 
ings of  his  labor,  whether  interest  were  at  one  or  at 
seven  per  cent.  But  if  interest  were  at  one  per  cent., 
and  H.  should  rent  the  second  farm,  G.  could  exact  but 
a  small  proportion  of  the  products  of  the  farm  as  rent. 
G.  would  receive  a  more  just  sum  for  the  use  of  the  farm, 
and  H.  would  likewise  receive  a  more  just  reward  for 
his  labor  upon  it. 

A  low  and  uniform  rate  of  interest  would  have  a  most 
beneficial  effect  on  trade ;  and  of  this  the  following  is  a 


182  BENEFICIAL   RESULTS    OF 

practical  illustration.  Suppose  a  merchant  in  the  city 
now  pays  $2,000  rent  for  his  store,  and  $800  for  his 
house.  His  rents  must  be  paid  from  the  profits  on  his 
goods  before  he  can  gain  anything  for  his  own  support. 
Reduce  the  rate  of  interest  to  one  per  cent.,  and  his  rents 
would  be  reduced  to  $400.  The  interest  on  his  stock  of 
goods  would  also  be  but  one-seventh  its  present  amount. 
Estimate  his  stock  at  $40,000  and  the  interest  upon  it  at 
seven  per  cent,  would  be  $2,800  a  year.  But  reduced  to 
one  per  cent.,  the  interest  would  amount  to  but  $400. 
The  saving  of  interest  on  the  goods,  and  of  rents  on  the 
house  and  store,  would  amount  to  $4,800.  Suppose  the 
merchant  to  sell  $250,000  worth  of  goods  in  a  year,  he 
must  calculate  at  least  two  and  a  half  per  cent,  for  guar- 
antee of  bad  debts.  This  per  centage  would  be  $6,250. 
Reduce  interest  to  one  per  cent.,  and  probably  it  would  not 
be  worth  a  tenth  of  one  per  cent.,  to  guarantee  the  debts. 
In  this  item,  there  would  be  a  clear  saving  of  $6,150. 
Add  the  $4,800;  there  would  be  saved  $10,950.  The 
cost  of  the  transportation  of  products  from  one  part  of 
the  country  to  another  would  be  greatly  reduced; 
because  the  per  centage  to  be  paid  for  the  use  of  capital 
to  make  internal  improvements  would  be  reduced  to  one 
per  cent.  All  this  difference  of  interest  would  be  gained 
and  saved  by  producers  and  distributers. 

That  a  low  rate  of  interest  would  drive  specie  from 
the  country,  is  a  false  supposition.  Do  the  lower  rates 
of  interest  in  England  drain  that  country  of  its  specie  ? 
Does  six  per  cent,  interest  in  the  New  England  States 
drive  their  specie  into  the  southern  and  western  States, 
in  which  the  legal  interest  is  eight  per  cent,  per  annum  ? 
Such  is  not  the  fact.  Where  interest  is  the  lowest,  money 
and  specie  are  the  most  abundant.  If  products  pay  a 
profit  by  shipment  to  England,  they  go  forward  rapidly 
to  meet  the  demand.  Not  so  with  money.  In  England, 
money  is  often  lent  for  months  together  at  from  two  to 


A   REDUCED   RATE   OF   INTEREST.  183 

three  per  cent,  per  annum,  while  the  New  York  banks 
lend  at  six  and  seven  per  cent,  per  annum.  For  years 
past,  the  people  of  the  United  States  have  paid,  nearly 
or  quite,  double  the  per  centage  for  the  use  of  money 
that  has  been  paid  in  England.  Why  does  not  money 
from  England  flow  in  and  supply  the  market,  so  as  to 
equalize  the  rates  of  interest  of  the  two  nations?  Why 
do  the  States  which  pay  the  highest  rates  of  interest  go 
abroad  most  frequently  to  borrow  money,  and  still  have 
not  enough  ?  It  is  because  the  rates  are  so  high  that  the 
people  of  these  States  cannot  produce  a  sufficient  surplus 
to  pay  the  interest  to  capitalists  among  themselves,  and 
to  other  States  where  the  interest,  though  lower,  is  still 
oppressive,  to  procure  the  money  required  to  carry  on 
their  business.  Money  is  a  legal  representative,  and 
serves  to  fix  an  income,  but  not  to  produce  wealth. 
Loan  it  twenty  or  thirty  times  where  the  interest  is  high, 
and  every  time  it  is  lent  it  makes  an  income  for  the 
lenders  for  a  longer  or  shorter  period,  which  impoverishes 
the  borrowers,  because  they  must  sell  their  products  to 
pay  the  interest.  The  principal  borrowed  must  soon  be  re- 
turned to  the  lenders  in  interest,  and  the  interest  is 
reloaned  to  the  people.  These  high  rates  of  interest 
serve  to  make  the  people  paying  them  tributary  to  a  few 
money-lenders  among  themselves,  and  in  other  States. 
For  a  few  years  previous  to  1851,  the  State  of  Wisconsin 
made  all  rates  of  interest  legal;  that  is,  the  rate  of 
interest  was  a  matter  of  agreement  between  borrower 
and  lender.  The  consequence  was,  that  the  rate  of 
interest  varied  from  12  up  to  100  per  cent,  per  annum. 
We  are  credibly  informed  that  the  highest  rate  was,  in 
many  instances,  exacted,  and  good  landed  security  obtained 
for  its  payment.  Let  us  see  what  effect  certain  rates  of 
'interest  on  money  borrowed  abroad  must  have  upon  the 
circulating  medium  of  the  State.  If  the  rate  of  interest 
were  at  one  per  cent.,  and  T.,  living  in  New  York,  should 


184:        A  REDUCED  KATE  OF  INTEREST. 

lend  $10,000  in  Wisconsin  at  that  rate,  the  borrower,  at 
the  close  of  the  year,  must  send  T.  $100.  The  people  of 
Wisconsin  would  have  $9,900  of  the  money  borrowed 
remaining  among  them  as  a  circulating  medium.  But  if 
T.  lend  his  money  at  twelve  per  cent.,  the  borrower 
must  send  T.  at  the  close  of  the  year  $1,200,  and  but 
$8,800  would  be  left  circulating  in  Wisconsin.  If  he 
lend  at  fifty  per  cent.,  the  borroAver  must  duly  send  T. 
$5,000  to  pay  the  interest,  so  that  one-half  of  the 
borrowed  money  is  returned  to  T.  in  New  York,  and 
only  $5,000  are  left  in  Wisconsin.  But  if  T.  lends  the 
$10,000  at  a  hundred  per  cent,  per  annum,  the  borrower 
must  send  T.  at  the  end  of  the  year  $10,000,  and  not 
one  dollar  of  it  is  left  in  Wisconsin.  Still  the  borrower 
would  be  indebted  to  T.  for  the  principal  of  $10,000  and 
in  another  year  would  owe  T.  $10,000  more  in  interest. 
It  would  not  take  a  very  large  amount  of  money  lent  at 
this  and  approximate  rates  by  the  citizens  of  New  York 
to  those  of  Wisconsin,  to  throw  the  balance  of  trade 
against  Wisconsin  and  in  favor  of  New  York :  nor,  in 
such  a  case,  would  it  be  strange  that  money  should  be 
scarce  in  Wisconsin  while  it  was  plenty  in  New 
York. 

In  the  United  States,  if  interest  were  reduced  to  one, 
or  to  one  and  one-tenth  per  cent.,  useful  productions 
would  probably  increase  from  twenty-five  to  fifty  per 
cent.  The  wealth,  instead  of  being  accumulated  in  a  few 
hands,  would  be  distributed  among  producers.  A  large 
proportion  of  the  labor  employed  in  building  up  cities 
would  be  expended  in  cultivating  and  beautifying  the 
country.  Internal  improvements  would  be  made  to  an 
extent,  and  in  a  perfection  unexampled  in  the  history  of 
nations.  Agriculture,  manufactures,  and  the  arts  would 
flourish  in  every  part  of  the  country.  Those  who  are 
now  non-producers  would  naturally  become  producers. 
The  production  would  be  owned  by  those  who  per- 


LOW   PRICES   OF   LABOR   IN   EUEOPE.  185 

formed  the  labor,  because  the  standard  of  distribution 
would  nearly  conform  to  the  natural  rights  of  man. 


SECTION  XIX. 

THE  LOW    PKICES     OF     LABOR    IN    EUROPEAN    COUNTRIES 
NOT   CAUSED   BY  THEIR   LOW   RATES    OF   INTEREST. 

In  answer  to  the  principle  advanced,  that  the  establish- 
ment of  a  low  rate  of  interest  will  secure  a  better  com- 
pensation to  labor,  it  will  be  said  that  money  is  plenty  in 
all  old  countries,  at  a  low  rate  of  interest,  and  that  labor 
is  very  poorly  paid;  whereas,  in  new  countries,  in 
which  interest  is  always  high,  high  prices  are  paid  for 
labor.  In  England,  France,  and  Germany,  money  is 
loaned  at  two,  three,  four,  and  five  per  cent,  per  annum, 
and  in  all  these  countries  the  prices  of  labor  are  very 
low  ;  while  in  the  United  States  of  America,  in  which  the 
lowest  legal  rate  of  interest  is  six  per  cent.,  and  the 
average  rate  double  that  of  European  nations,  the  prices  of 
labor  are  also  double.  In  former  ages,  the  rates  of  interest 
in  these  now  old  countries  were  very  high,  and  by  this 
means  the  property  was  early  accumulated  in  the  posses- 
sion of  a  few.  These  few  owning  the  property,  and 
letting  it  to  those  who  were  destitute  of  the  means  of  pay- 
ing the  rent  or  interest  except  by  the  products  of  their 
labor  on  the  property,  the  lenders  could  no  longer  collect 
the  high  rates  ;  and  a  reduction  of  interest  necessarily  fol- 
lowed, because  the  laws  could  not  enforce  the  collection  of 
the  higher  rates,  where  the  ability  to  pay  them  did  not  exist. 

As  a  general  thing,  emigrants  to  new  countries  are  in- 
dustrious and  enterprising  persons,  who  have  little  pro- 
perty, and  seek  a  new  home  because  they  have  not  the 
means  of  purchasing  farms,  etc.,  in  old  settlements.  If 
these  pioneers  hire  laborers  to  assist  them  'in  clearing 
and  preparing  their  lands  for  use,  they  must  pay  higher 


186  LOW   PRICES   OF   LABOR   IN   ETJEOPE 

wages  than  are  usual  in  older  countries,  for  the  laborers 
have  many  hardships  to  encounter.  The  first  settlers  im- 
port their  provisions  until  they  can  raise  a  crop.  The 
new  soil  produces  largely.  All  fresh  emigrants  being 
compelled  to  buy  provisions  until  they  can  raise  their  own, 
a  constant  market  is  afforded  for  the  surplus  products  of 
earlier  settlers,  and  they  are,  consequently,  able  to  pay 
good  prices  for  labor.  Emigrants  to  new  countries  raise 
the  principal  part  of  their  provisions,  but  depend,  in  a 
great  measure,  on  older  countries  for  clothing,  imple- 
ments of  husbandry,  etc.  Their  products  are  consumed 
among  themselves  ;  and  they  have  few,  if  any,  to  send  to 
cities  or  manufacturing  towns,  to  exchange  for  neces- 
sary articles.  They  must  send  money  to  buy  them  ;  or, 
if  they  purchase  on  credit,  the  money  must  be  had  at  the 
maturity  of  the  debts.  This  drains  off  their  money.  Al- 
though they  make  great  improvements,  add  immensely 
to  the  value  of  their  land,  and  the  wealth  of  the  country 
rapidly  increases,  yet  money  is  very  scarce,  and  the  peo- 
ple are  compelled  to  contract  debts  for  clothing,  imple- 
ments of  husbandry,  etc.  Any  one  who  has  money  to  lend 
can  obtain  exorbitant  interest,  and  those  who  are  in  debt 
will  offer  high  rates  to  their  friends  in  older  countries,  to 
induce  them  to  lend  their  money  in  the  settlement.  The 
scarcity  of  money  is  so  great,  that  capitalists  require  the 
best  security  that  can  be  offered,  to  quadruple  the 
amount  of  their  loans.  Interest  is  maintained  at  ten 
twenty,  or  a  higher  rate  per  cent,  per  annum,  and  this 
rapidly  draws  property  into  the  possession  of  capitalists. 
Every  money-lender  thinks  himself  justified  in  demand- 
ing as  high  a  rate  of  interest  as  his  neighbor.  "When 
mortgages  become  due,  property,  in  many  cases,  is  sold 
for  less  than  half  the  cost  of  the  labor  to  make  the  im- 
provements upon  it.  The  holder  of  money  can  buy  pro- 
perty at  one-fourth  of  its  actual  value,  and  another  who 
has  not  the  money  to  pay,  will  perhaps  repurchase  it  at 


NOT   CAUSED   BY   LOW   BATES   OF   INTEREST.        187 

a  large  advance,  paying  a  small  portion  down,  and 
agreeing  to  give  a  high  rate  of  interest  on  the  remainder. 
He  makes  what  is  termed  a  good  bargain  in  the  pur- 
chase. In  this  way  interest  is  maintained  at  enormous 
rates,  and  lands  and  improvements  pass  rapidly  into 
the  hands  of  capitalists. 

In  new  and  thinly  settled  countries,  where  fertile  lands 
are  at  low  prices,  the  people  do  not  starve,  even  when 
they  are  charged  ten,  twenty,  or  even  thirty  per  cent, 
per  annum  on  borrowed  money  and  property ;  but  these 
rates  of  interest  concentrate  the  property  rapidly  into 
the  hands  of  a  few,  and  break  up  and  keep  hundreds  of 
thousands  of  laborers  poor.  They  can,  however,  gene- 
rally mid  employment  by  which  they  may  obtain  their 
food.  But  as  countries  grow  older,  the  population  more 
dense,  lands  higher  in  price,  and  concentrated  in  fewer 
hands,  the  mechanical  arts  begin  to  flourish,  and  manu- 
factories are  established,  in  which  hundreds  of  workmen 
labor  for  their  daily  support.  The  manufactories  are 
carried  on  by  individuals,  by  firms,  or  by  incorporated 
companies.  If  money  become  scarce,  and  interest  increase 
to  double,  treble,  or  quadruple  the  ordinary  rate,  the 
prices  of  goods  inevitably  fall,  the  wages  of  the  workmen 
are  reduced,  and  great  numbers  are  thrown  out  of  employ- 
ment. The  demand  for  goods  rapidly  decreases,  for  pro- 
ducers generally  have  become  impoverished,  and  are 
unable  to  purchase  their  usual  supplies,  and  many  of  them 
must  subsist  on  charity.  If  the  scarcity  of  money  and 
the  high  rates  of  interest  continue,  the  manufacturers  too 
must  break ;  for  to  pay  the  same  amount  of  debt,  they 
must  sell  twenty-five  or  fifty  per  cent,  more  of  their 
goods  than  when  interest  was  at  the  lower  rate. 

Although  the  rates  of  interest  in  all  old  countries  are 
much  lower  than  in  newer  countries,  yet  they  are  suffi- 
ciently high  continually  to  centralize  the  wealth,  and  to 
increase  more  and  more  the  number  of  the  poor.  In  all 


188  LOW   PKICE8   OF  LABOR   IN   EUROPE 

the  old  countries  the  established  rates  of  interest  are  high 
enough  to  concentrate  the  wealth  in  a  few  hands,  even 
in  a  new  country ;  not,  however,  so  rapidly  as  the  higher 
rates  of  interest  which  are  usually  paid  in  newer  coun- 
tries. In  consequence  of  our  higher  rates  of  interest  the 
property  of  the  United  States  is  accumulating  in  the 
hands  of  a  few  men  much  more  rapidly  than  in  the  older 
countries.  This  accumulation  will  continue  until  the 
rates  of  interest  are  reduced  below  the  rates  obtained  in 
the  older  countries. 

The  fluctuations  of  the  rates  of  interest,  in  all  countries, 
render  it  difficult  to  offer  any  very  clear  illustrations  of 
their  bearing  upon  labor,  except  upon  general  principles. 
In  England,  the  rates  of  interest  vary  according  to  the 
necessity  of  the  borrower,  from  one,  two,  or  three  per 
cent,  per  annum,  to  four,  five,  six,  seven,  eight,  nine,  ten, 
eleven,  and  twelve  per  cent. ;  and  similar  variations  of 
interest,  though  at  much  higher  rates,  occur  in  our  own 
large  cities,  and  to  a  considerable  extent  in  our  towns 
and  villages.  But  let  twelve  nations  fix  twelve  different 
rates  of  interest,  maintaining  the  rates  uniform,  the  first 
at  one  per  cent.,  the  second  at  two  per  cent.,  and  so  on 
to  twelve  per  cent.,  and  the  concentration  of  wealth  in 
few  hands,  in  the  different  nations,  would  increase  in 
nearly  the  same  ratio  with  the  rates  of  interest.  The 
ratio  would  be  almost  exact,  except  for  the  profligacy 
and  extravagance  of  many  of  the  rich,  and  the  benevo- 
lence of  others.  This  general  principle  will  hold  good, 
whether  the  country  be  new,  rich  and  fertile,  or  whether 
it  be  old,  or  poor,  because  the  accumulation  is  according 
to  the  rate  per  cent.  A  copper  cent,  loaned  at  six  per 
cent,  interest  per  annum,  will  double  its  principal  in  pre- 
cisely the  same  time  that  a  gold  eagle,  at  the  same  rate 
of  interest,  would  double  its  principal.  It  is  a  mistaken 
idea,  that  it  is  right  to  pay  a  higher  rate  of  interest  in 
a  new  and  fertile  country,  because  production  is  more 


NOT  CAUSED  BY  LOW  BATES  OF  INTEREST.    189 

easily  made.  If  labor  will  produce  a  greater  quantity  of 
products,  capital  has  no  right,  through  an  unjust  stand- 
ard of  accumulation,  to  take  them  without  rendering  a 
fair  equivalent ;  but  if  the  rate  of  interest  be  too  high,  it 
will  inevitably  do  so.  There  is  no  more  justice  in  increas- 
ing the  rate  of  interest,  on  account  of  facility  in  produc- 
tion, than  there  would  be  in  increasing  the  size  of  the 
bushel,  because  labor  would  produce  more  bushels  of 
grain. 

In  all  ages  and  nations,  the  rates  of  interest  maintained 
have  been  so  high  as  continually  to  concentrate  the 
wealth  in  a  few  hands.  When  the  wealth  of  a  nation 
becomes  thus  centralized,  the  producers  and  distributers 
who  are  destitute  of  property,  are  compelled  to  borrow 
money,  and  rent  property  from  its  holders.  Suppose  the 
whole  property  of  a  nation  to  be  accumulated  in  the 
possession  of  one  man  (for  this  shows  the  principle  more 
strongly),  then  all  other  individuals  would  be  compelled 
either  to  buy  the  property  on  credit,  or  to  rent  it.  If  he 
should  charge  three  per  cent,  per  annum  on  the  money 
or  property,  it  could  hardly  fail  to  keep  nineteen-t \ven- 
tieths  of  the  people  in  perpetual  poverty.  For  a  few  years 
they  might  appear  to  be  prosperous,  but  their  prosperity 
could  not  possibly  be  permanent,  because  the  rent,  or 
interest,  would  certainly  absorb  more  than  the  people 
could  earn.  A  rate  of  interest  of  even  two  per  cent, 
would  produce  the  same  results,  but  in  a  less  degree, 
because  there  would  be  many  more  owners  of  property, 
and  the  general  indebtedness  of  the  people  would  not  be 
nearly  so  great,  as  it  is  at  the  higher  rates  of  interest. 
It  cannot  then  be  true,  that  the  low  rates  of  interest 
maintained  in  the  old  countries,  are  the  cause  of  the  low 
prices  of  labor,  and  the  poverty  of  the  producers,  but  on 
the  contrary,  the  former  high  rates  of  interest  accumu- 
lated the  property  in  a  few  hands,  and  the  present 
rate's  of  interest  are  sufficiently  high  to  contimie  the 


190       LOW  PEICE8  OF  LABOR  IN  EUROPE. 

accumulation  and  prevent  the  reward  of  labor.  High 
rates  of  interest  have  been,  and  are,  the  cause  of  the 
poverty  of  producers  in  all  nations. 

In  England,  where  the  average  rate  of  interest  is  three 
per  cent,  per  annum,  the  labor  is  compelled  to  double  the 
entire  capital  of  the  nation,  in  the  hands  of  its  holders, 
in  twenty-three  and  a  half  years,  besides  which,  the  labor- 
ers must  furnish  their  own  support.  But  this  is  not  the 
only  cause  of  the  depression  of  labor  in  Britain.  An 
enormous  sum  of  money  was  borrowed  by  the  govern- 
ment of  its  wealthy  citizens,  and  expended  in  wars. 
This  National  Debt  amounts  to  about  $4,000,000,000,  the 
annual  interest  on  which,  at  an  average  of  three  per 
cent.,  is  $120,000,000,  wrhich  the  people  must  pay  by  an 
annual  taxation  of  their  products.  Labor  receives  no 
benefit  from  it.  The  money  is  not  invested  in  land,  nor 
in  anything  else  of  which  the  labor  has  the  use  by  the 
annual  payment  of  the  interest.  This  interest  on  the 
National  Debt  is  additional  to  the  too  high  rate  of  inter- 
est already  charged  on  all  the  capital  actually  em- 
ployed. 

It  is  commonly  supposed  that  the  land  owners  of  Eng- 
land are  the  oppressors  of  the  toiling  multitude.  The 
power  to  lease  land,  at  the  present  rates,  is  given  by  the 
law,  fixing  the  rate  of  interest  on  money.  The  op- 
pression by  lending  money,  however,  is  greater  than  that 
by  leasing  laud,  because  the  rates  of  interest  on  money 
are  continually  fluctuating,  and  the  oppression  of  the 
producing  classes  by  its  power,  being  indirect,  can  be 
made  greater.  The  income  of  the  holder  of  English 
government  securities  is  earned  by  the  operatives  in  the 
mines  and  factories,  and  by  the  seamstresses  and  various 
workwomen  in  the  cities.  But  the  bondholder  comes  in 
direct  contact  with  none  of  these.  His  income  is  paid 
by  the  government,  which  gathers  it  from  every  branch 
of  industry  in  the  country  by  grievous  taxations.  Does 


NOT   CAUSED   BY    LOW    KATES    OF    IKTEKF8T.        191 

it  not  beggar  the  producing  classes  to  pay  the  interest 
to  the  money-owner,  as  much  as  to  pay  the  rent  to  the 
land  owner  ?  Are  the  operatives  in  the  manufactories 
and  mines  any  better  provided  for  than  the  laborers  on 
the  soil  ?  Overgrown  landed  estates  have  generally  been 
acquired  through  exorbitant  interest  on  money.  The  only 
way  to  eradicate  the  oppression  caused  by  holding  them 
at  high  rents,  is  to  reduce  the  interest  upon  money  to  such 
a  rate  that  the  products  of  labor  will  legally  go  to  those 
who  perform  the  labor,  instead  of  going  to  the  owners 
of  capital.  Every  dollar  that  passes  into  the  hands  of 
the  receiver  of  interest,  is  representative  of  products, 
and  all  the  excess,  above  a  just  rate  of  interest,  is  taken 
from  the  rightful  earnings  of  the  laborer.  Without  the 
intervention  of  the  government,  which  collects  the  inter- 
est by  various  taxations,  so  that  the  means  of  oppres- 
sion are  somewhat  concealed,  the  people  would  refuse  to 
submit  to  the  injustice,  and  revolution  in  this  system 
would  naturally  follow. 

If  the  national  rate  of  interest,  in  Great  Britain,  on  all 
bank  and  private  loans,  and  on  the  National  Debt,  were 
reduced  to  one  per  cent.,  and  the  interest  were  regularly 
paid,  the  bonds  of  the  government  would  always  be  at 
par.  A  hundred  pounds  of  the  National  Debt  would  be 
worth  as  inuch  as  a  hundred  pounds  in  coin,  or  a  hundred 
pound  note  of  the  Bank  of  England.  Now  this  Bank 
and  private  bankers  continually  vary  the  rates  of  interest. 
At  some  periods  they  charge  two,  three,  or  four  times 
more  than  others,  while  the  bonds  of  the  government 
bear  a  regular  rate  of  interest.  Therefore,  when  the 
Bank  and  its  Branches  lend  at  a  low  rate,  the  govern- 
ment securities  rise  in  price ;  and  when  they  lend  at  very 
high  rates,  the  government  bonds  depreciate. 

Suppose  the  interest  on  the  National  Debt  were  re- 
duced from  three  to  one  per  cent,  per  annum.  This 
simple  procedure  would  save  to  the  laboring  classes 


192  LOW   PRICES   OF  LABOR   IN   EUROPE. 

eighty  millions  of  dollars'  worth  of  their  products.  If 
the  interest  on  loans  of  money  by  the  Bank  of  England, 
and  by  capitalists,  and  brokers,  were  also  reduced  to  one 
per  cent.,  it  would  increase  the  saving  to  the  laboring 
classes  to  some  two  or  three  hundred  millions  annually. 
The  per  centage  income  upon  capital  can  only  be  paid 
with  the  proceeds  of  labor ;  therefore  this  reduction  of 
the  per  centage  income  would  be  equivalent  to  the  dis- 
tribution of  several  hundred  millions  of  dollars  among 
the  producing  classes,  according  to  the  labor  per- 
formed. The  effect  of  so  large  an  annual  distribution 
among  this  class  would  be  to  diffuse,  in  a  few  years,  com- 
petence and  happiness  where  now  exist  only  poverty  and 
misery. 

The  maintenance  of  the  interest  on  money  at  one,  or 
at  some  other  rate  per  cent,  lower  than  this,  would  soon 
and  forever  end  the  periodical  depressions  of  trade,  labor, 
and  the  prices  of  products,  and  the  general  oppression  of 
the  laboring  classes. 


CHAPTER  IV. 
THE  BANKING  SYSTEM. 

SECTION    I. 

THE    NATURE    OP    BANKS,   THEIE   INSTITUTION,   AND   THJ5 
PRINCIPLES   BY   WHICH   THEY   ARE   GOVERNED. 

BANKS,  like  other  incorporated  companies,  receive  their 
chartered  powers  by  legislative  enactments.  These 
charters  make  it  incumbent  upon  the  banks  to  divide 
their  gains  in  dividends  to  their  stockholders,  and  to  re- 
port to  the  legislature  yearly,  or  oftener,  their  situation 
and  standing.  It  is  presumed  that  the  publishing  of  these 
dividends  and  reports  will  keep  the  people  informed  of 
the  doings  and  utility  of  the  banks.  Yet  the  practical 
operations  of  banking,  and  their  special  and  general  influ- 
ences for  good  or  for  evil,  are  hidden  from  the  public 
view.  Causes  are  felt  to  be  in  operation  which  the  peo- 
ple cannot  comprehend — the  changes  in  the  market  value 
of  property,  and  in  the  prices  of  labor,  are  accounted  for 
by  the  abundance  and  scarcity  of  money  ;  but  why  money 
is  scarce  at  one  time,  and  abundant  at  another,  is  to  the 
great  body  of  the  people  utterly  unknown. 

It  is  the  intention  of  the  author  to  place  the  institution 
and  operation  of  our  banking  system  fairly  before  the 
producers  of  the  nation,  that  they  may  clearly  understand 

Q  198 


194:  THE   NATURE   OF   BANKS. 

its  effects  upon  their  interests.  The  producers  them- 
selves will  then  determine  whether  they  will  change  the 
system  for  one  to  be  established  on  right  principles,  and 
that  will  act  for  the  good  of  all,  or  continue  the  present 
one,  the  effect  of  which,  for  ages,  in  this  and  other 
countries,  has  been  to  accumulate  wealth  in  the  hands  of 
a  few,  to  the  constant  injury  and  hopeless  poverty  of  the 
many. 

The  Constitution  of  the  United  States  declares,  Art.  I. 
Sec.  X.,  "  No  State  shall  emit  bills  of  credit,  make  any- 
thing but  gold  and  silver  coin  a  tender  in  payment  of 
debts."  A  bill  of  credit  is  a  representative  of  property. 
A  bank  bill  is  a  bill  of  credit ;  it  is  taken  for  the  amount 
of  value,  or  property,  set  forth  upon  its  face,  and  if  it 
does  not  actually  represent  that  value,  the  owner  must 
suffer  loss. 

The  General  Government  has  reserved  to  itself  the 
right  to  coin  money  and  emit  bills  of  credit.  It  has,  at 
least  impliedly,  assumed  the  obligation  to  provide  a 
representative  of  property  to  the  extent  required.  It 
has,  however,  neglected  to  supply  the  necessary  kind  and 
quantity  of  money  to  effect  the  exchanges  essential  to  the 
interest  and  welfare  of  all  civilized  communities.  The 
consequence  has  been  an  attempt  of  the  State  governments 
to  supply  the  deficiency  by  the  establishment  of  banks. 
The  mode  of  instituting  banks  has  been  various,  but 
however  instituted,  experience  has  shown  their  unfitness 
to  fulfil  the  public  purposes  of  their  institution,  and  also 
their  unequalled  power  as  instruments  for  gathering  the 
earnings  of  labor  tocapital,  without  any  adequate  return. 

The  nature  of  banks  is  sometimes  said  to  be  similar  to 
that  of  manufacturing  companies.  The  chief  point  of 
resemblance  in  their  constitutions  is,  that  the  stockhold- 
ers, both  in  manufacturing  companies  and  in  banks,  are 
bound  only  for  the  amount  paid  in  as  capital  stock,  and 
are  not  liable  for  any  further  debts  of  the  institutions. 


TIIE   NATURE   OF   BANKS.  195 

In  this  particular  they  are  on  the  same  footing.  But  in 
other  respects  they  differ  widely.  Banks  are  chartered, 
in  order  to  furnish  the  people  with  a  public  representative 
of  value,  that  is,  with  a  currency  by  which  their  soil  and 
products  may  be  exchanged.  Manufacturing  companies 
are  chartered  in  order  to  facilitate  the  production  of  use- 
ful articles  for  the  support  and  comfort  of  man.  Banks 
deal  in  representatives  of  property,  and  the  interest  on 
these  representatives  is  the  source  of  their  gains.  Manu- 
facturers gain  by  increasing  the  amount  of  actual  produc- 
tion, for  combinations  of  machinery  diminish  the  expense 
of  producing  useful  articles.  Still,  although  manufactur- 
ing companies  may  have  an  equal  amount  of  capital  with 
banks,  say  from  $100,000  to  $2,000,000,  yet  any  man  may 
manufacture  articles  made  by  companies,  or  any  number 
of  men  may  combine  for  the  same  purpose,  without  a 
charter  or  any  other  legislative  authority  ;  and  they  have 
as  much  right  to  sell  their  articles  in  market  as  chartered 
companies.  If  banking  institutions  and  manufacturing 
companies  be  of  the  same  nature,  why  do  not  legislatures 
allow  individuals,  however  small  their  capital,  to  manu- 
facture and  circulate  their  notes  as  money,  as  well  as  to 
manufacture  goods  and  sell  them  to  any  one  who  will 
purchase  them  ?  Why,  too,  do  they  limit  the  amount  of 
business  that  banks  may  transact,  and  leave  manufactur- 
ing companies  to  be  governed  by  the  discretion  of  their 
directors  ?  If  bank-notes  be  merchandise,  why  not  allow 
banks  to  sell  their  notes  for  other  merchandise,  instead 
of  lending  them  for  an  interest  in  money?  Why  do 
legislatures  limit  the  interest  that  banks  may  charge  for 
the  use  of  their  bank  notes,  more  than  they  limit  the 
price  of^goods  manufactured  by  chartered  companies  ?  It 
is  because  the  notes  issued  by  the  banks  are  made  a 
public  medium  of  exchange  for  all  property,  even  for  the 
goods  of  chartered  manufacturing  companies,  that  their 
quantity,  and  the  interest  upon  them,  are  legally  re 


196  CHAKTEBPD   BANKS. 

stricted.  It  is  true  that  legislative  action  has  thus  far 
accomplished  very  little  toward  the  regulation  of  a  cur- 
rency ;  but  these  restrictions  upon  it,  and  the  necessity 
for  legal  authority  to  create  it,  prove  that  it  is  not  regarded 
as  merchandise. 

The  business  of  the  public  generally  is  made  greatly 
dependent  on  that  of  a  comparatively  few  individuals  and 
corporations,  who  are  empowered  to  issue  bank-notes ; 
for  all  the  debts  of  the  people  must  be  founded  upon  and 
paid  in  money,  most  of  which  these  individuals  and  cor- 
porations are  alone  authorized  to  furnish.  It  is  generally 
understood  that  the  banks  provide  a  very  large  amount 
of  capital  for  public  use,  and  it  is  therefore  thought  just 
that  they  should  receive  large  amounts  of  interest.  But 
if  it  be  found  that  the  public  furnish  all  the  security  to 
make  the  bank-notes  a  safe  currency,  and  that  the  banks 
gain  immense  sums  in  interest  merely  for  their  labor  in 
manufacturing  the  bank-notes,  and  exchanging  them  for 
indorsed  notes  of  the  people,  it  will  be  evident  that  the 
public  is  suffering  a  great  and  unnecessary  loss,  and 
could  have  this  labor  performed,  and  the  same  results  ac- 
complished, or  rather  a  far  more  equitable  currency  main- 
tained, at  a  comparatively  small  expense. 

Formerly,  all  our  banks  were  conducted  under  special 
charters,  granted  to  each ;  and  their  capital  was  profess- 
edly all  specie.  More  recentjy,  several  of  the  States  have 
passed  General  Banking  Laws,  under  which  United 
States  and  State  stocks,  and  bonds  and  mortgages  are 
substituted  as  part  of  capital  stocks.  To  establish  a  bank 
under  the  first  system  the  persons  desirous  of  banking 
petition  their  State  government  for  a  charter  granting 
them  the  privilege.  The  petition  states  that  the  bank  is 
needed  by  the  public,  yet  we  shall  see  presently  that  it  is 
not  only  for  private  purposes,  but  that  it  is  to  be  con- 
ducted soWy  for  the  benefit  of  the  stockholders.  The 
charter,  according  to  law,  requires  the  parties.,  or  the 


CHARTEEED   BANKS.  197 

stockholders,  to  furnish  a  certain  amount  of  money,  which 
constitutes  the  capital  stock.  When  this  is  paid  in,  the 
bank  becomes  an  office  of  discount  and  deposit,  and  is 
authorized  by  its  charter  to  issue  and  lend  bank-notes  to 
circulate  as  money.  The  chartered  banks  in  the  State  of 
New  York  are  authorized  to  discount  two  and  a  half 
times  the  amount  of  their  capital :  that  is,  a  bank  that  has, 
say  one  million  of  dollars  paid  in  as  capital  stock,  is  at 
liberty  to  discount  or  lend  to  the  people  two  and  a  half 
millions  of  dollars.  Without  a  bank  charter,  the  men 
who  own  the  million  of  money  which  constitutes  this 
capital,  could  lend  only  one  million  of  dollars.  In  granting 
the  charter,  the  legislature  grants  to  these  few  individ- 
uals the  privilege  of  charging  the  people  seven  per  cent, 
interest  on  one  and  a  half  millions  of  dollars  never  owned, 
by  the  stockholders.  The  bank  issues  bank-notes  bear- 
ing no  interest,  and  exchanges  them  for  the  indorsed 
notes  of  the  people,  bearing  interest.* 

The  bank  pays  no  interest  upon  deposits,  and  charges 
interest  on  all  the  indorsed  notes  given  in  exchange  for  its 
bank-notes.  The  interest  upon  one  and  a  half  millions  of 
dollars'  worth  of  indorsed  notes,  at  seven  per  cent., 
amounts  to  one  hundred  and  five  thousand  dollars  a  year. 
This  interest  is  paid  on  a  capital  which  is  entirely  ficti- 
tious, so  far  as  the  bank  is  concerned.  If  there  be  any 
capital  underlying  this  one  and  a  half  millions  of  dollars, 
it  is  furnished  in  the  indorsed  notes  given  by  the  people 
in  exchange  for  the  bank-notes.  The  solvency  of  the 
bank  for  one  and  a  half  millions,  depends  upon  the  good- 
ness of  the  indorsed  notes  received  from  the  people,  and 
not  upon  its  own  capital ;  for  however  safely  its  one  mill- 

*  Money  is  popularly  said  to  bear  such  a  rate  of  intertst,  as  if  the 
money  itself  bore  the  interest.  But,  in  fact,  money  bears  no  in- 
terest ;  the  obligations  given  for  the  use  of  money  bear  the  interest ;  for 
when  money  circulates  in  making  cash  purchases  of  commodities  and 
property,  in  which  no  obligations  are  given,  no  interest  is  paid. 


198  CHARTERED   BANKS. 

ion  of  capital  may  be  loaned,  it  can  redeem  but  one  mill- 
ion  of  liabilities.  If  the  bank  should  lose  a  million  of 
dollars,  by  bad  debts,  or  otherwise,  the  entire  loss  would 
fall  upon  the  stockholders,  for  this  amount  is  comprised 
in  the  capital  of  the  bank  ;  and,  by  the  charter,  is  made 
first  liable  for  the  losses  which  may  be  sustained.  But 
the  remaining  $1,500,000  of  bank-notes  loaned  could  not 
be  redeemed  unless  the  indorsed  notes  received  in  ex- 
change for  the  bank-notes  were  against  responsible  per- 
sons. If  the  drawers  and  indorsers  were  able  to  pay 
only  a  part  of  these  notes,  then  only  a  part  or  a  certain  per 
centage  of  the  bank-notes  could  be  paid  ;  and,  if  no  part 
of  the  indorsed  notes  could  be  collected,  the  million  and 
a  half  of  bank-notes  would  be  a  total  loss  to  the  holders. 
The  original  $1,000,000  of  capital  has  little  basis  of 
specie,  and  the  surplus  $1,500,000,  issued  over  and  above 
the  capital,  has  none.  The  latter  is  based  upon  a  priv- 
ilege granted  by  the  government  to  a  company  of  men 
to  make  bank-notes  bearing  no  interest,  and  exchange 
them  for  the  indorsed  notes  of  the  people  bearing 
interest.  True,  all  bank-notes  are  made  payable  on 
demand  in  specie,  and  if  banks  refuse  to  pay  specie  they 
are  liable  to  forfeit  their  charters.  But  all  obligations 
between  individuals,  even  to  book-accounts,  are  also 
legally  payable  in  specie ;  and  all  debtors  are  liable  to 
prosecution  if  they  refuse  to  pay  their  debts  in  specie. 
The  law  which  requires  the  banks  to  redeem  their  notes 
on  demand  in  specie,  no  more  furnishes  them  with  specie 
for  that  purpose  than  it  furnishes  individuals  with  specie 
to  redeem  their  notes  and  pay  their  debts.  Nearly 
three  times  the  whole  amount  of  specie  in  the  banks  in 
the  State  of  New  York,  from  1835  to  1845,  would  have 
been  required  to  pay  their  deposits,  at  any  one  time 
during  that  period,  and  this  without  redeeming  in  specie 
a  dollar  of  their  circulation.  If  specie  should  be  gener- 
ally demanded,  the  laws  could  not  enable  the  banks  to 


CHARTERED   BANKS.  199 

pay  their  notes  and  deposits  in  coins,  nor  individuals  to 
pay  their  notes  and  debts  in  coins. 

The  principle  upon  which  the  contracts  between  the 
banks  and  the  people  are  made,  may  be  illustrated  by 
supposing  the  government  to  fix  a  value  upon  ten  silver 
spoons  belonging  to  John  Doe,  and  make  them  a  tender 
in  payment  of  debts.  As.  they  are  not  sufficient  in  amount 
to  form  a  currency,  John  Doe  is  empowered  to  make 
twelve  paper  spoons  on  the  credit  of  each  silver  one, 
all  of  which  paper  spoons  he  is  to  redeem  on  demand 
with  silver  spoons.  He  retains  the  ten  silver  spoons,  and 
loans  at  seven  per  cent,  interest  the  one  hundred  and 
twenty  paper  spoons,  charging  interest  on  them  at  seven 
per  cent.,  and  receiving  in  exchange  for  them  good 
indorsed  notes  payable  in  two,  three,  or  four  months 
in  silver  spoons.  All  the  paper  spoons  loaned  to  the 
people  are  payable  in  silver  spoons  on  demand  at  John 
Doe's  office,  who  has  but  ten  silver  spoons  to  pay  the 
one  hundred  and  twenty  paper  ones.  If  the  holder  of 
ten  paper  spoons,  should  demand  and  take  the  ten  silver 
spoons,  John  Doe  would  be  obliged  to  make  the  indorsed 
notes  which  he  had  received  from  his  customers  for  paper 
spoons  redeem  the  remaining  one  hundred  and  ten  paper 
spoons  which  he  had  issued.  Ah1  these  were  based  upon 
paper,  and  must  be  paid  again  in  paper  if  they  are  paid 
at  all.  Still,  he  would  receive  from  the  people  interest 
upon  a  hundred  and  ten  silver  spoons  which  he  never 
owned,  and  this  by  means  of  a  legislative  charter  granted 
to  him  because  he  was  the  owner  of  ten  silver  spoons. 
If  the  legislature  would  not  sanction  the  balancing  of  these 
debts  with  paper,  the  people  could  never  pay  Doe  in 
silver  spoons  the  indorsed  notes  they  owed  him;  nor 
would  Doe  be  able  to  redeem  his  paper  spoons  with  silver 
spoons.  The  drawer  of  the  ten  silver  spoons  would  have 
engrossed  the  whole  tender  upon  which  all  the  contracts 
were  founded. 


200  GENERAL   BANKING   LAW. 

In  general,  debts  are  contracted  for  land,  labor,  and 
products ;  but  none  of  these  is  a  tender  in  payment  of 
debts.  Debts  are  payable  in  a  tender  established  by  law, 
but  are  generally  paid  in  bank-notes  which  are  used  as  a 
substitute  for  the  tender.  Admitting,  then  a  silver  dollar 
to  possess  intrinsic  value  equal  to  its  nominal  amount, 
how  is  it  possible  for  it  to  make  twelve  representatives 
of  itself,  and  make  each  one  of  the  twelve  as  valuable  as 
itself,  when  at  the  same  time  any  one  of  the  twelve  has 
power  to  demand  and  take  the  silver  dollar,  and  thus  to 
leave  eleven  destitute  of  any  basis  of  silver,  and  incapa- 
ble of  being  paid  in  it  ?  If  paper  money  be  allowed  to 
pass  as  representative  of  specie,  there  should  be  a  silver 
dollar  for  every  paper  dollar.  Otherwise,  the  paper 
money  cannot  represent  specie.  A  silver  dollar  cannot  be 
represented  by  two  paper  dollars,  each  of  which  would  be 
as  valuable  as  itself,  more  than  the  owner  of  one  acre 
of  land  can  give  two  deeds,  each  for  the  one  acre,  to 
different  individuals,  and  make  both  deeds  good.  The 
first  deed  must  take  the  entire  acre.  If  the  second  be  of 
any  value,  it  must  be  made  so  by  offsetting  the  consider- 
ation given  'in  payment  for  the  deed,  and  not  the  land 
which  the  deed  purports  to  secure.  If  paper  money  be 
allowed  to  circulate,  it  should  not  be  under  the  pretence 
that  it  represents  what  it  does  not  and  cannot  repre- 
sent. 

In  April,  1838,  the  State  of  New  York  passed  a  Gene- 
ral Banking  Law,  allowing  any  number  of  individuals  to 
associate  together  and  establish  a  bank,  provided  they 
furnish  a  capital  of  not  less  than  $100,000.  To  secure  the 
public  from  loss  by  the  issue  of  bank-bills  under  this  law, 
the  banks  deposit  with  the  Comptroller  an  amount  hi 
bonds  and  mortgages,  or  State  stocks,  equal  to  the 
amount  of  bank-bills  which  they  are  authorized  to  issue. 
The  bills  are  then  countersigned  by  the  Comptroller.  If 
any  bank  fail  to  redeem  its  bills,  the  Comptroller  is  em- 


GENERAL   BANKING   LAW.  201 

powered  to  sell  the  bonds,  and  redeem  the  bills  with  the 
proceeds. 

This  mode  of  supplying  the  public  with  money  is 
deemed  by  many  a  very  safe  one.  Still,  during  the  first 
six  or  seven  years  in  which  this  new  system  was  in  ope- 
ration, thirty-four  banks  failed,  and  did  not  redeem  their 
notes  at  par.  Some  paid  only  twenty-five  or  thirty  cents 
on  the  dollar.  Others  paid  a  per  centage  varying  from 
thirty  to  ninety-four  cents.  Of  forty  banks  closed  by 
the  Comptroller,  only  six  redeemed  their  circulation  at 
par.  At  the  time  of  the  Comptroller's  sale  of  the  secur- 
ities given  for  the  redemption  of  their  bank-notes,  the 
forty  banks  had  a  circulation  of  $1,233,374.  The  circu- 
lation of  the  six  banks  of  which  the  notes  were  finally 
redeemed  at  par  by  the  Comptroller  amounted  to 
$120,729,  leaving  a  balance  of  circulation  of  $1,112,645, 
which  was  compromised  at  rates  varying  from  twenty-five 
to  ninety-four  cents  on  the  dollar.  Doubtless  a  large 
amount  of  these  notes  was  bought  up  by  brokers  at  a 
much  greater  discount  than  that  at  which  they  were 
eventually  redeemed  by  the  Comptroller,  so  that  the 
public  lost  probably  from  $700,000  to  $800,000,  besides 
the  losses  of  depositors  which  do  not  appear. 

It  may  be  said  that  the  securities  placed  with  the 
Comptroller  were  not  the  bonds  of  the  State  of  New 
York,  but  those  of  other  States  ;  that  these  States  failed 
to  pay  their  interest,  and  consequently  their  bonds  depre- 
ciated greatly  below  their  par  value,  and  were  not  good 
security.  True ;  but  at  the  time  they  were  taken  by  the 
Comptroller  they  were  deemed  good  security  for  the 
redemption  of  the  bank-notes.  It  must  be  remembered, 
too,  that  in  1837  the  bonds  of  the  State  of  New  York, 
bearing  an  interest  of  six  per  cent.,  sold  at  about  thirty 
per  cent,  below  their  par  value.  The  securities  pledged 
with  the  Comptroller  at  the  present  time  are  of  the  same 
nature  as  those  then  pledged.  If  the  interest  on  money 


202  GENEKAL   BANKING   LAW. 

should  now  rise  as  high  as  then  obtained  on  loans  of  bank- 
notes, the  bonds  of  the  State  would  again  depreciate  as 
much  as  in  1837.  The  same  loss  of  confidence  in  the 
ability  of  the  State  to  pay  its  debts  would  exist,  because 
rates  of  interest  at  two,  three,  and  four  per  cent,  a  month 
so  rapidly  increase  the  indebtedness  of  the  people,  that 
their  Avealth  is  soon  transferred  to  a  few  capitalists,  who 
are  enabled  to  control  the  rate  of  interest,  and  conse- 
quently the  market  value  of  State  bonds  and  property. 
As  long  as  money  can  be  obtained  on  good  securities  at 
six  or  seven  per  cent,  interest  per  annum,  the  bonds  of 
the  State,  bearing  six  per  cent,  interest,  will  command  at 
least  their  par  value.  But  only  so  long  as  banks  and 
capitalists  choose  to  keep  the  rate  of  interest  as  low  as 
six  or  seven  per  cent.,  will  these  State  bonds  continue 
safe  for  the  redemption  of  the  bank-bills. 

We  Avill  now  see  by  whom  the  security  of  this  banking 
capital  is  furnished,  and  by  whom  the  interest  upon  it  is 
paid.  In  order  to  provide  capital  for  a  bank,  the  indi- 
vidual who  desires  to  establish  the  institution  must  buy 
State  bonds  to  secure  the  bank-notes  which  he  intends  to 
issue.  He  invests  $100,000  in  bonds,  on  which  the  peo- 
ple pay  him  six  per  cent,  interest.  Although  his  money 
is  invested,  yet  he  receives  $100,000  in  bank-notes, 
countersigned  by  the  Comptroller,  upon  which  he  is 
authorized  to  bank.  Adding  a  few  thousand  dollars  in 
specie  to  his  bank-notes,  he  opens  an  office  of  discount 
and  deposit,  loans  out  the  $100,000  in  bank-notes,  which 
he  received  from  the  Comptroller,  and  perhaps  $100,000, 
or  $150,000  more  received  from  the  people  in  deposit,  on 
which  he  pays  no  interest.  He  charges  interest  on  all 
the  money  he  lends.  If  the  people  should  call  upon  him 
to  redeem  his  bank-notes,  and  pay  their  deposits  in  specie, 
he  would  probably  not  have  more  than  $10,000,  $20,000, 
or  $30,000  in  specie ;  and  if  there  should  be  a  run  upon 
the  bank,  this  would  not  meet  the  demand  for  a  single 


SPECIE   OWNED   BY   THE   BANKS.  203 

day.  The  banker  would  be  compelled  to  suspend  specie 
payments.  What  would  then  secure  the  remaining  in- 
debtedness of  the  bank  except  the  indorsed  notes  of  the 
people,  and  the  State  bonds,  for  which  the  people  are 
responsible  ?  The  banker  is  not  liable  beyond  the  capital 
invested.  He  lends  his  money  on  securities  furnished  by 
the  property  of  others.  The  object  of  this  Banking 
Law  was  the  security  of  the  bank-notes.  This  object,  as 
we  have  shown,  has  not  been  reah'zed.  The  people  have 
not  only  lost  $700,000  or  $800,000  by  the  failure  of  the 
banks  to  redeem  their  notes,  but  the  depositors  also  have 
lost  large  amounts.  Deposits  in  a  public  banking  insti- 
tution, ought  to  be  as  secure  as  the  bank-notes  circulated ; 
but  for  this  no  provision  is  made  by  the  law.  Bankers, 
under  the  sanction  of  the  General  Banking  Law,  obtain 
interest  from  the  people  on  two  or  three  times  more  pro- 
perty than  they  actually  own.  This  law,  as  also  all 
other  laws  granting  banking  privileges,  creates  a  fictitious 
capital  for  which  the  people  are  compelled  to  pay  inter- 
est five  or  six  times  greater  than  they  can  afford  to  pay 
for  real  capital  and  at  the  same  time  justly  reward  labor. 
It  has  operated  to  enrich  bankers  and  capitalists,  instead 
of  operating  for  the  benefit  of  the  people. 


SECTION    II. 

THE    AMOUNT    OF    SPECIE    OWNED    BY    THE    BANKS,    AND 
THE   INTEREST   PAID   BY   THE    PEOPLE   ON   BANK   LOANS. 

The  chartered  banks  profess  to  transact  their  busi- 
ness entirely  on  a  specie  basis.  If,  to  show  the  actual 
amount  of  their  specie,  we  take  that  of  the  banks 
of  Connecticut,  which  have  been  conducted  with  as  much 
safety  to  the  public,  and  credit  to  themselves,  as  those  of 
any  other  State  in  the  Union,  and  far  more  than  the 


204: 


SPECIE   OWNED   BY   THE   BANKS. 


average,  it  will  be  not  only  a  fair  but  a  favorable  criterion 
of  the  specie  capital  of  the  banks  in  the  other  States. 
The  following  table,  extracted  from  the  "Merchant's 
Magazine,"  vol.  xvii.,  page  209,  is  an  abstract  of  the 
Commissioners'  Report  for  eleven  years,  from  1837  to 
1847  inclusive;  to  which  is  added  from  the  same  work, 
vol.  xxii.,  page  320,  the  Commissioners'  Report  for  the 
year  1849.  Thus  we  have  the  following  statement  of  the 
condition  of  the  banks  during  twelve  years. 


Year. 

1837 
!>:5s 
1839 
1840 
1841 
Ib42 
1S43 
1844 
1845 
1S46 
184T 

1849 

Capital. 

Circulation. 

Total  Liabilities. 

Specie. 

Loans  and  Dig- 
counts. 

$8,744,697  50 
8,754,467  50 
8,832,223  00 
8,878,245  60 
8,873,927  50 
8,876,317  57 
8,580,393  50 
8,292,238  00 
8,359,748  00 
8,475,630  00 
8,6-5,74200 

$3,998  825  80 
1,920,552  45 
8,987,815  45 
2,82.i,589  95 
2,784,721  45 
2,555,638  83 
5,879,947  02 
3,490,968  06 
4,102,444  00 
3,565,947  06 
4,437,631  06 

$15,715,964  59 
12,802,681  11 
14,942,779  31 
12,950,572  40 
13,866,373  45 
13  465,052  32 
12,914,124  66 
14,472,681  32 
15,243,235  79 
15,892,685  25 
15,784,772  04 

$415,386  10 
585,447  86 
502,180  15 
499,032  52 
454,298  61 
471,238  08 
438,752  92 
455,430  80 
458,65879 
481,86709 
462,165  58 

$13,246,495  08 
9,769,'2-r,  N) 
12,286,946  97 
10,428,630  87 
10,944,673  35 
10,683,418  37 
9,798,392  27 
io,S42.y.v>  ;r> 
12,477,196  06 
13,032,600  78 
12,781,657  43 

95,273,629  57 
8,985,917  00 

88,549,575  18 
4,511,571  00 

1157,550,87244 

5,163,957  95 
575,676  00 

126,292,893  .13 
13,740,591  00 

$104,259,546  57 

$5,744,683  95 

$140,033,489  83 

Average  Capital $8,688,295  55 

Average  Liabilities 13,129,239  37 

Average  Specie 478,71950 

Average  Loans  and  Discounts 11,669  457  44 


By  the  foregoing  table  it  will  be  seen  that  the  average 
amount  of  the  specie  held  by  the  banks  in  the  State  of 
Connecticut,  for  the  twelve  years,  was  $478,719,  while 
the  average  amount  of  their  loans  to  the  public,  during 
the  same  period,  was  $11,669,457 — more  than  twenty- 
four  and  one  third  times  as  much  money  as  the  banks 
had  specie.  The  annual  interest  on  $11,669,457  was 
$700,167.  If  they  could  have  loaned  only  their  specie,  the 
interest  would  have  amounted  to  but  $28,723.  The  banks 
gained  from  the  public  annually,  $671,444  above  the  in- 
terest on  their  specie;  and,  in  the  twelve  years, 


SECURITY   FOR   BANK   LOANS.  205 

$8,057,328.  They  collected  this  interest  in  advance,  and 
made  their  dividends  half  yearly  to  their  stockholders ; 
therefore,  it  is  proper  to  compound  this  interest  half 
yearly,  which  would  swell  their  gains  to  nearly 
$12,000,000,  that  is  to  say,  $1,000,000  interest  annually. 
These  were  actual  gains,  as  much  realized  by  these  banks 
as  if  they  had  produced  and  sold  annually  $700,167 
worth  of  agricultural  products. 

These  banks  were  chartered  with  a  professed  specie 
capital,  averaging  for  the  twelve  years,  $8,679,962; 
while  the  average  of  the  specie  actually  held  by  them 
was  less  than  one-eighteenth  part  of  this  sum.  How 
was  this  excess  of  capital  above  the  average  $478,719  in 
specie  made  up,  and  was  it  furnished  by  the  stockholders 
or  by  the  public  ?  The  specie  held  by  these  banks,  as 
we  have  said,  did  not  constitute  one-eighteenth  part 
of  their  professed  capital ;  hence  there  must  have  been 
other  capital  to  make  up  the  seventeen  parts  we  find 
wanting,  otherwise  their  bank-notes  could  not  have  been 
safe ;  for,  one  thousand  dollars'  worth  of  land  is  as  good 
security  for  the  payment  of  eighteen  thousand  dollars  in 
money,  as  one  thousand  dollars  in  specie  for  the  payment 
of  eighteen  thousand  dollars  in  bank-notes.  But  the 
banks,  instead  of  eighteen  lent  over  twenty-four  dollars 
for  each  dollar  in  specie,  so  that  the  specie  held  by  the 
banks  was  but  a  fraction  over  four  per  cent,  of  their 
loans.  The  specie  was,  then,  a  very  small  item  in  the 
security  of  the  bank-notes,  and  was  not  essential  to  their 
safety.  If  the  banks  in  other  States  have,  in  proportion 
to  their  loans,  double  the  amount  of  specie  owned  by  the 
Connecticut  banks,  it  is  no  evidence  that  they  are  more 
safe,  because  their  safety  cannot  depend  upon  four  or 
eight  per  cent,  of  specie.  No  bank-notes  can  be  safe 
money  unless  secured  for  their  full  amount. 

Let  us  see  how  the  specie  capital  of  banks  is  generally 
made  up.  Suppose  one  bank  to  be  chartered  with  a 


206  SPECIE   OWNED   BY   THE   BANKS. 

specie  capital  of  $500,000,  all  paid  in,  and  to  lend 
$750,000  for  approved  indorsed  notes.  A  second  bank 
is  likewise  chartered  with  a  capital  of  $500,000  ;  to  make 
up  which,  $400,000  of  the  notes  of  the  first  bank  and 
$100,000  in  specie,  also  drawn  from  it,  are  paid  in.  The 
notes  of  the  first  and  second  banks,  together  with  a  small 
sum  in  specie,  form  the  capital  of  a  third ;  and  thus  bank 
after  bank  is  formed,  say  to  the  number  of  eighteen,  each 
with  a  professed  specie  capital ;  while,  in  reality,  all  of 
them  together  own  only  $500,000  in  specie.  How  is 
this  excess  over  the  $500,000  secured  ?  The  loans 
of  the  first  bank  for  $500,000  were  secured  by  the  same 
sum  in  specie  ;  but  when  it  had  lent  $250,000  more,  the 
excess  was  secured  by  the  indorsed  notes  offered  by  the 
people  for  discount.  When  the  second  bank  had  discounted 
$750,000,  the  two  banks  had  under  discount  a  million 
and  a  half  of  dollars,  one  million  of  which  was  secured  by 
indorsed  notes,  and  but  half  a  million  by  specie.  A 
third,  fourth,  and  finally  eighteen  banks  having  dis- 
counted $750,000  each  of  indorsed  notes,  the  aggregate 
amount  would  be  $13,500,000,  of  which  $500,000  only 
would  be  secured  by  specie,  and  the  sole  security  for 
$13,000,000  would  be  the  indorsed  notes  held  by  the 
banks  against  the  public.  Some  of  these  discounted  in- 
dorsed notes  might  be  against  stockholders  in  the  banks ; 
but  all  of  them,  whether  against  stockholders  or  others, 
are  secured  by  the  property  of  their  drawers  and  in- 
dorsers,  and  not  by  the  capital  of  the  banks.  If  thirteen, 
out  of  thirteen  and  a  half  millions  of  dollars,  are  made 
safe  for  the  public  use  by  these  indorsed  notes,  evidently 
the  remaining  half  million  could  be  made  safe  in  the 
same  manner ;  and  we  could  thus  dispense  with  specie 
altogether.  If  ninety-six  per  cent,  of  the  money  is  now 
secured  by  indorsed  promissory  notes,  certainly  the 
other  four  per  cent,  can  be  secured  by  similar  means. 
The  people  furnish  the  security  for  the  bank-notes,  and 


SECURITY   FOB   BANK   LOANS.  207 

pay  the  interest,  which  is  the  source  of  all  the  gains  of 
the  banks.  It.  and  S.  are  men  of  property.  R.  draws  his 
note  at  six  months  for  $10,000,  gets  S.  to  indorse  it,  and 
then  has  it  discounted  at  bank.  If  interest  be  at  seven 
per  cent.,  R.  will  receive  only  $9,650  in  bank-notes,  and 
at  the  maturity  of  the  note  must  pay  $10,000  to  take  it 
up  :  the  bank  thus  gains  $350  as  the  interest  or  rent  of 
the  bank-notes  for  six  months.  Under  no  circumstances 
would  the  bank  discount  the  note  unless  it  were  deemed 
perfect  security  for  the  return  of  the  money  and  the  pay- 
ment of  the  interest.  R.'s  note,  indorsed  by  S.,  and 
held  by  the  bank,  is  secured  by  the  property  of  these 
men  ;  and  the  bank-notes  secured  by  the  indorsed  notes 
are  also  secured  by  the  same  property  of  R.  and  S.  If 
the  bank-notes  circulate  for  six  months,  R.'s  indorsed 
note  also  secures  to  the  bank  the  return  of  $350  more 
than  it  gave  for  the  note. 

A  similar  illustration  may  be  made  on  a  more  ex- 
tended scale,  say  on  $5,000,000  ;  about  the  sum  kept 
under  discount  by  some  of  the  larger  banks  in  New 
York.  Suppose  a  bank  to  discount  notes,  drawn  and 
indorsed  by  various  individuals  in  good  credit,  for 
$5,000,000,  having  (to  simplify  the  process,  and  bring  the 
gains  under  one  item)  twelve  months  to  run.  It  would 
pay  to  these  individuals  $4,650,000  in  bank-notes  :  and  the 
$350,000  deducted  as  discount  would  be  clear  gain,  less 
the  labor  to  make  and  exchange  the  bank-notes.  •  If  the 
public  need  the  $4,650,000  to  meet  their  business  obliga- 
tions for  the  year,  the  money  will  continue  to  circulate, 
and  the  bank  will  not  be  called  upon  to  redeem  it,  during 
that  period.  At  the  close  of  the  year,  when  the  indorsed 
notes  become  due,  if  the  drawers  should  collect  every 
dollar  of  the  bank-notes  issued,  $350,000  would  still  be 
wanting  to  pay  the  bank  the  indorsed  notes  for 
$5,000,000 ;  and  the  people  would  be  dependent  on  the 
bank  for  a  further  discount  of  notes  to  obtain  the  money 


208  SPECIE   OWNFD   BY   THE   BANKS. 

due  as  the  year's  interest.  If  one  bank  furnished  all  the 
money  of  the  nation,  the  people  would  be  dependent  on 
that  one  for  money  to  fulfil  all  their  obligations.  In- 
crease the  number  of  banks  to  a  thousand,  and  the  in- 
dorsed notes  in  proportion,  and  the  transactions  will  be 
more  numerous  and  appear  more  complicated,  as  they  ac- 
tually are ;  but  it  will  not  alter  in  the  least  the  principles 
upon  which  the  banks  gain  the  interest  out  of  the  earn- 
ings of  the  public,  while  the  public  furnishes  all  the  secur- 
ity necessary  to  make  the  bank-notes  safe  to  circulate  as 
money. 

The  people  furnish  double  the  security  to  make  the 
bank-notes  safe  that  they  give  to  each  other  in  the 
ordinary  purchase  and  sale  of  products.  The  farmer 
sells  his  produce  to  the  miller  or  merchant  on  credit ; 
the  miller  sells  his  flour,  the  wool-grower  his  wool,  and 
the  manufacturer  his  goods  mostly  on  two,  four,  six, 
eight,  ten  and  twelve  months'  credits  to  city  merchants, 
who  resell  them  on  like  credits  to  other  city  or  country 
merchants,  and  these  dispose  of  them  chiefly  on  credit,  to 
farmers,  mechanics  and  other  consumers.  Farmers, 
mechanics  and  merchants,  in  ordinarily  good  credit,  can 
buy  goods  on  their  own  responsibility ;  and  their  pur- 
chases are  generally  limited  only  by  their  own  discretion. 
But  they  cannot  take  book  accounts  to  the  banks,  and 
get  bank-notes  in  exchange  on  the  responsibility  of 
the  man  who  owes  the  money.  fN"otes  offered 
for  discount  must  have  only  a  certain  time  to  run, 
must  be  drawn  by  men  known  to  the  directors  to  be 
responsible,  and  indorsed  by  one  or  two  others  in 
equally  good  credit.  Thus  the  people  do  give  at  least 
double  the  security  to  make  the  bank-notes  safe  to  circu- 
late as  money  that  they  do  to  secure  themselves  against 
loss  in  the  sale  of  the  products  of  their  own  labor.  Yet 
they  pay  to  the  banks  five  or  six  times  more  than  a  fail- 
equivalent  for  the  material  and  labor  to  make  and  ex- 


SECURITY    FOR   BANK   LOANS. 


209 


change  the  bank-notes  for  the  indorsed  notes  ;  and  this 
is  a  total  loss  to  the  producing  classes,  and  a  clear  gain  to 
the  banks. 

We  will  now  estimate  the  proportion  of  capital  stock 
furnished  in  specie  by  the  stockholders  of  the  banks  in 
the  State  of  New  York,  and  the  proportion  furnished  by 
the  balancing  power  of  paper  against  paper.  The  follow- 
ing table,  taken  from  the  State  Register,  shows  how 
much  of  the  State  currency,  in  1844  and  1845,  was  based 
upon  specie,  and  how  much  was  based  upon  paper  notes : 

BANK   REPORTS  FOR  1844-45. 

COMPARISON    OF   THE     PRINCIPAL    ITEMS,    AT    QUARTERLY    PERIODS,    FROM 
FEBRUARY,  1844,    TO    FEBRUARY,    J  845,  INCLUSIVE. 


Capital 

February  1, 
1844. 
$43,649.837 
16,385,401 
1,488,843 
29,02t;,415 
15,610,554 

Mayl,      1   August  1, 
1S&.                 1$44. 
$43,462,811  $43,448,005 
18,365,031    18,091,824 
1.506,167      1,210,794 
30,742,289    2s,757,112 
15,467,494    16,102,922 

Nov.  1, 
1844. 
$48,618,607 
20,152,219 
1,584,558 
30,391,622 
14,481,108 

February  1, 

$43,674,146 
18,518,402 
1,607,572 
25,976,246 
11.501,102 

Canal  Fund  

Deposits  
Due  Banks  

Loans  and   Discourse 
Stocks    and      promis- 
sory notes  
Specie  
Cash  items   

$70,0-25,734 

11,052,453 
10,036,642 

4,502.479 
2,275,172 
10,267,207 

$74,527,858  $75,546,592 

10,862,330    10,648,211 
9,455,161    10,191,974 
5,999,952     4,916,862 
8.148,421     2,511,326 
8,817,179     8,859,328 

$77,347,718 

10,778,678 
8,96S,092 
6,047,52." 
2,368,467 
8,767,518 

$70,888,578 

10,244,048 
6,893,286 
4,839,880 
2,887,108 
7,684,308 

Due  from  Banks  

From  the  foregoing  table,  it  will  be  perceived  that  the 
banks  were  indebted  at  the  above  period  to  the  amount 
of  from  $101,272,468,  up  to  $110,128,104.  Their  average 
indebtedness,  including  the  refunding  of  the  capital  stock 
to  the  stockholders,  was  $106,931,004.  The  average 
amount  of  their  specie  at  the  different  periods  as  above, 
was  $9,119,001.  Deduct  the  specie  from  the  indebted- 
ness— i.  e.,  $9,119,001  from  $106,931,004 — and  we  have 
left  $97,812,003,  which  sum  must  have  been  cancelled  by 
paper.  Our  banks  have  specie  enough  to  redeem  only 
about  one-fifth  part  of  their  capital  stock.  The  balance 
of  their  capital  stock,  the  redemption  of  the  bank-notes 


210  SPECIE   OWNED   BY    THE   BANKS. 

in  circulation,  and  the  payment  of  the  deposits,  are 
secured  by  the  indorsed  notes  of  the  people,  binding  the 
property  of  the  drawers  and  indorsers.  Their  property 
as  much  secures  the  bank-notes,  as  it  does  their  own 
notes.  The  bank-notes  are  representatives  of  the  pro- 
perty of  the  people,  and  not  representatives  of  the  pro- 
perty of  the  banks.  Not  a  single  dollar  of  the  paper 
issued  over  and  above  the  actual  amount  of  specie,  is 
secured  by  their  capital  stock,  because,  if  none  of  these 
indorsed  notes  and  bonds  of  the  State  were  ever  paid, 
not  a  single  dollar  of  the  indebtedness  of  the  banks,  either 
for  bank-notes  or  deposits,  above  their  actual  specie, 
would  ever  be  paid.  The  $97,812,003  would  be  a  total 
loss  to  the  holders  of  the  bank-notes,  to  the  depositors, 
and  to  the  stockholders. 

The  interest  collected  on  the  indorsed  notes  and  State 
bonds  supports  the  banks,  and  pays  all  their  extravagant 
expenditures  in  granite  buildings,  salaries  of  officers,  etc. 
They  can  pay  their  presidents  and  cashiers  from  $3,000 
to  $5,000  each,  and  other  expenses,  house-rent,  etc.,  in 
proportion,  to  the  amount  of  $40,000  or  $50,000  yearly. 
They  can  also  pay  to  the  stockholders  from  three  to  five, 
six,  or  seven  per  cent,  in  dividends  every  six  months. 
The  banks  under  legislative  authority  make  the  public 
furnish  the  capital,  and  then  pay  interest  on  this  capital. 
But  although  the  industry  of  the  people  supports  the 
whole,  they  have  no  voice  in  the  management.  The 
directors  in  the  banks  can  at  any  time  call  upon  them  to 
pay  off  their  notes  and  cancel  the  bank-notes ;  and  if  they 
fail,  they  are  blamed  for  over-production  and  over-trad- 
ing. When  the  banks  contract  their  loans  rapidly,  and 
distress  the  people,  the  directors  are  said  to  be  prudent 
and  judicious  managers.  Yet  if  the  people  should 
demand  specie,  the  banks  could  not  pay  it,  unless  they 
could  collect  it  out  of  the  indorsed  notes  of  the  people. 
But  these  indorsed  notes'  were  never  founded  upon 


SECURITY   FOB   BANK   LOANS.  211 

specie,  and  could  not  be  paid  in  it,  because  the  drawing 
and  indorsing  of  the  notes  by  the  people,  and  the  en- 
graving of  the  bank-notes  by  the  banks,  and  the  exchange 
of  the  bank-notes  for  the  indorsed  notes,  do  not  create 
gold  and  silver  coins  to  pay  either  the  bank-notes  or  the 
indorsed  notes.  There  has  never  been  a  time  when  the 
banks  could  have  paid  specie  for  a  week,  for  their  aver- 
age deposits  are  more  than  three  times  their  whole 
amount  of  specie. 

The  table  shows  that  the  average  amount  of  the  capital 
of  the  banks  in  the  State  of  New  York,  during  the 
period  mentioned,  was  $43,569,591,  and  their  average 
indebtedness  was  $106,931,004.  The  difference  of  these 
two  sums  is  $63,361,413.  The  annual  interest  upon 
$63,361,413,  at  seven  per  cent.,  was  $4,435,333,  which 
the  people  of  the  State  paid  to  the  stockholders  and 
officers  of  the  banks  for  furnishing  bank-notes  above  the 
amount  of  their  professed  specie  capital.  The  people 
wrote  their  own  notes,  had  them  indorsed,  and  took 
them  to  the  banks  to  be  discounted.  The  banks  engraved 
their  Bank-notes,  and  gave  them  in  exchange  for  the 
indorsed  notes.  For  engraving  these  notes,  and  making 
these  exchanges,  the  people  of  the  State  paid  to  the 
banks  annually  $4,435,333,  or  as  much  as  the  farmers  of 
the  State  receive  for  four  millions  four  hundred  and 
thirty-five  thousand  three  hundred  and  thirty-three 
bushels  of  wheat,  at  $1  per  bushel.  The  labor  of  pro- 
ducing such  an  amount  of  wheat  was  great ;  the  labor 
of  producing  the  bank-notes  was  very  small,  yet  the  interest 
paid  on  these  bank-notes  would  have  bought  this  quantity 
of  wheat.  At  the  end  of  the  year  the  people  of  the 
State  returned  all  the  bank-notes  to  the  banks,  together 
with  the  value  of  this  large  amount  of  wheat  to  pay  the 
year's  interest.  The  same  amount  of  interest  accrued 
every  year,  and  called  for  the  same  amount  of  their  pro- 
ducts. They  sold  their  products  in  market,  and  paid  the 


212  SPECIE   OWNED   BY   THE   BANKS. 

interest  to  the  banks  with  the  proceeds  of  the  sales,  the 
same  to  them  as  if  they  had  carried  their  wheat  and 
products  directly  to  the  banks  to  pay  the  interest.  If 
the  entire  capital  of  the  banks  had  been  specie,  the 
people  would  have  paid  the  same  amount  for  the  use  of 
the  bank-notes  which  would  have  been  issued  over  and 
above  the  specie. 

The  interest  yearly  paid  for  the  use  of  $63,361,413,  in 
bank-notes,  was  a  legal  equivalent  for  the  four  millions 
four  hundred  and  thirty-five  thousand  three  hundred 
and  thirty-three  bushels  of  wheat  yearly  raised  upon 
a  certain  quantity  of  land ;  and  the  legal  value  of  the 
$63,361,413,  in  bank-notes,  was  equal  to  the  actual  value 
of  the  land  and  labor  necessary  to  produce  the  wheat. 
The  power  of  the  bank-notes  was  an  exact  balance 
against  these  products  and  the  land  upon  which  they  were 
produced.  If  the  quantity  of  money  was  at  any  time 
diminished,  and  the  rate  of  interest  increased,  a  larger 
amount  of  products  was  required  to  balance  the  smaller 
amount  of  money,  and  a  larger  amount  of  products  to 
balance  the  interest  on  the  smaller  amount  of  money. 
Still  this  money  must  have  been  used  to  balance  products, 
for  it  was  the  only  public  representative  of  value,  and 
must  have  been  employed  as  a  tender,  or  as  a  substitute 
for  a  tender,  in  payment  of  debts.  The  promise  of  the 
banks  to  pay  specie  for  their  bank-notes  on  demand,  does 
not  enable  them  to  pay  the  specie,  nor  does  it  alter  the 
monopolizing  power  of  the  interest  on  the  money  over 
products. 

If  our  bank-notes  are  good  for  the  purchase  of  pro- 
perty by  the  people,  certainly  they  should  be  equally  good 
for  the  purchase  of  property  by  the  banks.  Let  us  reverse 
the  relative  positions  of  the  banks  and  the  people.  Sup- 
pose instead  of  lending  their  money  to  the  people  to  buy 
property,  the  banks  should  buy  property  with  their  bank- 
notes, and  let  it  out  to  the  people.  This  would  put  the 


SECURITY   FOB   BANK   LOANS.  213 

bank-notes  into  circulation,  and  the  banks  would  be  the 
landlords  of  the  property,  instead  of  being  the  owners 
and  lenders  of  the  money.  Let  the  people  then  call 
upon  the  banks  for  the  redemption  of  the  bank-notes  in 
specie,  and  in  default  of  payment  sue  them ;  and  if  they 
wish  to  borrow  bank-notes  to  save  their  property  from 
sheriff's  sale,  charge  them  one,  two,  or  three  per  cent,  a 
month  for  the  use  of  the  bank-notes.  •  Let  the  banks  try 
to  rent  their  property  so  as  to  make  the  rents  pay  these 
rates  of  interest.  This  would  only  place  the  stockholders 
in  a  position  similar  to  that  in  which  they  now  often, 
though  indirectly,  place  the  people.  It  is  evident  that 
it  would  be  impossible  for  them  to  redeem  their  bank- 
notes in  specie,  or  to  redeem  them  in  any  way  except  by 
selling  their  property  and  taking  these  bank-notes  in 
payment,  as  the  people  now  give  their  notes  to  the  banks 
and  pay  the  discount,  and  when  their  notes  become  due, 
collect  these  bank-notes  together,  and  take  them  to  the 
banks  to  redeem  their  indorsed  notes.  If  the  banks 
should  buy  the  property  with  their  bank-notes,  and  their 
friends  should  guarantee  the  property  worth  the  pnce 
paid,  the  property  and  the  guarantee  would  secure  the 
bank-notes.  It  would  only  place  the  banks  under  the 
necessity  of  cultivating  their  property,  and  selling  the 
products  to  pay  the  interest.  It  would  be  as  possible  to 
redeem  the  bank-notes  with  specie,  under  the  supposed 
circumstances,  as  it  now  is.  If  the  banks  were  called 
upon  to  redeem  them  now,  they  would  crowd  the  people, 
and  sell  their  property,  and  in  the  supposed  circumstances, 
rhe  people  would  crowd  the  banks,  and  sell  their  property. 
In  both  cases  the  debts  must  be  cancelled  by  offsetting 
the  property  against  them,  for  they  could  not  be  re- 
deemed with  specie. 

It  is  perfectly  obvious  that  our  legislative  bodies  have 
founded  our  banking  system  on  false  pretences — upon 
promises  the  banks  neither  can,  nor  expect  to  fulfil.  Tho 


214  SPECIE   OWiraD   BY   THE   BANKS. 


only  reason  why  the  banks  can  exist  upon  such  a  basis  is, 
that  the  people  do  not  demand  the  specie  for  their  notes 
and  deposits.  The  government  enacts  a  law  binding  all 
debtors  to  make  their  payments  in  specie,  when  it  is  per- 
fectly well  known  that  specie  does  not  exist  in  sufficient 
quantities  to  enable  them  to  fulfil  the  requirement.  More 
than  eleven-twelfths  of  the  debts  between  the  banks  and 
the  people  are  contracted  with  a  paper  balance,  and  have 
no  reference  to  specie.  Of  course,  the  only  means  of 
paying  them  is  by  balancing  one  paper  note  with  another. 
If  the  banks,  or  the  people,  or  the  government  should  in 
every  case  exact  what  the  laws  require,  it  would  be 
impossible  to  meet  the  demand.  If  the  three  should  ex- 
act specie  in  payment  for  their  obligations,  it  would 
inevitably  bankrupt  them  all,  and  almost  certainly  cause 
starvation  in  the  midst  of  abundance,  if  not  civil  war.  If 
the  governments  of  the  States  as  well  as  the  General 
Government  should  refuse  to  take  bank-notes  in  collect- 
ing and  disbursing  their  revenues,  probably  the  people 
could  not  pay  their  duties  and  taxes.  The  necessary 
withdrawal  of  specie  to  meet  these  engagements  would 
at  once  cause  the  banks  throughout  the  Union  to  suspend 
specie  payments.  The  need  of  money  would  then  compel 
the  people  to  petition  the  legislatures  of  their  respective 
States  to  sanction  this  suspension,  and  allow  the  banks  to 
continue  to  discount  without  paying  specie  on  demand. 
They  would,  however,  still  be  allowed  to  charge  interest 
upon  all  the  indorsed  notes  of  the  people  received  in  ex- 
change for  the  bank-notes,  which  would  then  be  avow- 
edly destitute  of  any  basis  of  specie. 

Can  anything  be  more  directly  opposed  to  every  prin- 
ciple of  justice,  than  laws  requiring  the  performance  of 
impossibilities  ?  Laws  which,  if  the  people  should 
attempt  to  execute  them,  instead  of  promoting  peace  and 
happiness,  would  cause  the  greatest  calamities  that  could 
possibly  befall  a  nation.  It  is  essential  to  good  govern- 


THE   BANK   OF   ENGLAND.  215 

ment  that  the  interest  and  welfare  of  the  people  should 
require  the  execution  of  its  laws,  and  whenever  their  vio- 
lation becomes  necessary  to  the  public  good,  it  is  self- 
evident  that  there  is  something  radically  wrong  in  the 
government  itself.  A  government  should  never  allow 
anything  to  pass  as  a  substitute  for  money ;  the  tender 
itself  should  be  equal  in  amount  to  the  wants  of  business. 
The  law  making  gold  and  silver  the  only  tender  in  pay- 
ment of  debts  is  well  adapted  to  build  up  and  sustain 
monarchical  governments,  because  it  must  infallibly  accu- 
mulate property  in  the  hands  of  a  few,  constituting  aris- 
tocracies, which  are  essential  to  this  form  of  government ; 
but  the  same  reason  that  qualifies  it  so  admirably  for  this 
purpose,  renders  it  incompatible  with  a  government  hav- 
ing for  its  sole  object  the  welfare  and  happiness  of  the 
people. 

SECTION  III. 

BASIS    OF   THE   BANK    OP   ENGLAND. 

The  Bank  of  England  is  established  upon  a  basis  similar 
to  that  of  the  banks  of  the  United  States.  Indorsed 
notes  secure  the  bank-notes,  and  not  specie.  The  bank- 
notes are  not  representatives  of  specie.  The  bullion  in 
the  bank  seldom  much  exceeds  the  amount  of  the  depo- 
sits. Should  the  depositors  draw  the  specie,  the  only 
way  in  which  the  bank  could  redeem  its  bank-notes 
would  be  to  take  them  in  payment  for  the  indorsed  notes 
it  holds  against  individuals.  If  these  indorsed  notes  were 
not  good,  the  bank-notes  would  be  worthless.  These 
indorsed  notes  are  secured  by  the  property  of  their 
drawers  and  indorsers  ;  their  property,  and  not  the  pro- 
perty of  the  bank,  secures  the  bank-notes. 

The  Bank  of  England  first  issues  £14,000,000,  on  gov- 
ernment securities.  This  is  making  paper  balance  paper. 
It  gives  to  the  bank  no  ability  to  pay  the  £14,000,000  in 


216  THE   BANK   OF   ENGLAND. 

bullion.  If  two  individuals  should  exchange  obligations 
for  £14,000,000,  this  exchange  would  not  produce  bullion 
to  pay  either  obligation.  The  bank-motes  for  £14,000,000 
have  not  a  fraction  of  value,  except  in  so  far  as  they  are 
secured  by  the  government  bonds,  and  these  bonds  are 
secured  not  by  the  bank,  but  by  the  property  and  produc- 
tive industry  of  the  people  of  England. 

All  the  gains  of  the  bank  by  the  recent  *  rise  of  interest, 
were  unfairly  taken  from  the  industry  of  the  people,  and 
appropriated  to  the  stockholders  of  the  bank.  The  idea 
was  given  out  that  the  bank  was  compelled  to  raise  the 
rate  of  interest  in  order  to  be  able  to  pay  specie  for 
its  obligations*  If  the  bank  had  been  established  upon 
a  proper  basis,  and  had  loaned  its  money  to  aid  the 
productive  industry  of  the  nation,  at  a  low  and  uniform 
rate  of  interest,  instead  of  making  its  loans  to  stock- 
jobbers and  brokers  to  reloan  at  high  rates,  the  recent 
crisis,  or  any  former  crisis  in  the  monetary  affairs  of  the 
country  could  not  have  happened.  But  the  bank  is 
established  upon  a  false  basis,  promising  to  pay  specie 
which  it  has  not  and  cannot  have.  Therefore,  in  the 
recent  crisis,  it  was  compelled  to  lend  its  money  to 
brokers  and  stock-jobbers,  otherwise  they  would  proba- 
bly have  drawn  its  specie,  and  compelled  it  to  suspend 
specie  payments.  The  bank  and  this  class  of  citizens 
work  for  one  another's  interest,  and  extort  the  last 
penny  from  the  producers  of  the  wealth,  under  the  pre- 
tence that  the  money,  or  the  bullion,  is  the  real  wealth  of 
the  nation,  and  they  keep  the  people  constantly  toiling 
for  the  bullion  without  ever  possessing  it,  while  the 
owners  of  the  bullion  contrive  to  live  in  luxury  upon 
what  the  labor  of  the  people  produces. 

To  show  that  the  bank  is  sustained  in  its  specie  pay- 
ments by  its  reciprocal  operations  with  capitalists,  and 

*  This  was  written  previous  to  1849.— [Ed.] 


BALANCING    POWER   OF   BANK-KOTES.  217 

that  the  bank-notes  are  secured  by  the  indorsed  notes 
of  the  people,  and  not  by  the  bullion  in  the  vaults,  it  will 
only  be  necessary  to  refer  to  the  weekly  reports  of  the 
bank.  October  23,  1847,  bullion,  £8,312,691.  Deposits, 
£8,588,509.  Net  circulation,  £20,318,175.  The  bullion 
amounted  to  £275,818  less  than  the  deposits:  and  if  the 
deposits  had  been  called  for  in  specie,  there  would  not 
have  been  a  shilling  in  bullion  toward  paying  the 
£20,318,175  of  bank-notes.  These,  if  paid  at  all,  must 
have  been  paid  by  balancing  them  off  against  the 
indorsed  notes  of  the  people,  held  by  the  bank.  Again, 
January  22,  1848,  the  bullion  had  increased  to 
£13,176,812,  the  deposits  had  increased  to  £10,774,870, 
and  the  circulation  had  diminished  to  £19,111,880.  De- 
duct the  deposits  from  the  bullion,  and  there  remained 
£2,401,942  in  bullion  to  pay  £19,1U,880.  Deducting 
the  bullion  there  remained  £16,709,938,  which,  if  it  had 
been  paid  at  all,  must  have  been  paid  by  balancing  off 
the  bank-notes  against  the  indorsed  notes  held  by  the 
bank  ;  as  if  two  individuals  should  exchange  notes,  and 
agree  to  pay  them  in  specie,  but  as  neither  has  the  specie 
to  pay,  agree  to  exchange  notes  again,  and  thus  close  the 
transaction.  The  exchange  of  the  bank-notes,  for  the 
indorsed  notes  of  the  people,  is  different  in  this  respect; 
the  bank  pays  no  interest  to  the  people,  but  it  makes  the 
people  pay  interest  on  the  bank-notes,  and  this  interest 
absorbs  the  productions  of  labor. 


SECTION  IV. 

THE    BALANCING    POWER    OF    BANK-NOTES     AND     DEPOSITS. 

It  has  been  already  stated  that  if  the  banks  become 

indebted  for  a  larger  sum  than  the  amount  of  specie  in 

their  vaults,  the  surplus  above  the  specie  must  be  paid 

by  balancing   paper  notes  with  paper  notes,  until  the 

10 


218  BALANCING   POWEK   OF   BANK-NOTES. 

amount  of  specie  in  their  vaults  is  exactly  equal  to  the 
amount  of  paper  for  which  they  are  liable.  This  state- 
ment was  made  taking  into  consideration  only  the  in- 
dorsed notes  discounted  by  the  banks,  and  the  bank- 
notes issued  by  them  as  their  proceeds.  The  bank-notes 
are,  however,  not  only  the  balancing  power  for  the 
indorsed  notes  discounted,  but  are  also  the  balancing 
power  for  all  individual  notes  given  in  payment  for  sales 
of  merchandise.  Although  these  business  notes  be  not 
discounted  at  bank,  nor  put  into  bank  for  collection,  the 
bank-notes  are  the  balancing  power  with  which  all  these 
debts  must  be  paid,  as  well  as  all  State  bonds  issued,  all 
bonds  and  mortgages  given  by  individuals,  and  all  debts 
contracted  for  lands,  goods,  wares  and  merchandise  sold 
on  credit  or  for  cash.  All  these  debts  must  be  paid 
either  with  bank-notes,  or  with  specie.  Taking  an 
average  of  the  whole  amount  of  contracts,  it  is  probable 
that  not  one  dollar  in  a  hundred  is  paid  in  specie. 

A  small  amount  of  money  is  always  capable  of  balan- 
cing or  paying  a  large  amount  of  notes,  bonds  and 
mortgages,  and  also  of  purchasing  many  times  its  own 
amount  of  property.  The  money  which  pays  for  one 
farm  may  also  pay  for  a  second,  third,  and  fourth,  the 
same  day. 

The  banks  gain  as  much  by  the  deposits  left  Avith 
them,  as  they  would  by  the  circulation  of  an  equal  amount 
of  bank-notes.  They  pay  no  interest  on  deposits,  and 
they  lend  their  deposits  to  depositors  and  others,  and 
charge  interest  on  them.  In  cities,  every  man  who  has  a 
large  business,  keeps  an  account,  and  deposits  his  ready 
money  in  some  bank.  Suppose  a  thousand  merchants  and 
mechanics  keep  deposit  accounts  of  a  thousand  dollars 
each  in  the  same  bank,  the  sum  will  amount  to  a  million 
of  dollars.  The  bank  can  lend  this  sum  to  the  depositors 
themselves,  and  make  them  pay  interest  on  it.  The 
money  may  be  paid  out  many  times  during  the  day ; 


MANAGEMENT  OF  THE  BANKS.         219 

but  before  three  o'clock,  when  the  banks  close,  it  will  re- 
turn in  deposit,  and  be  ready  for  use  the  next  day. 
Some  of  the  deposit  accounts  may  be  drawn  down  to  a 
hundred,  and  some  even  to  five  dollars,  while  others  may 
be  increased  to  five,  ten,  or  twenty  thousand  dollars,  yet 
the  average  balance  in  bank  will  vary  but  little.  It  ap- 
pears from  the  Report  of  the  Bank  Commissioners,  that 
the  deposit  accounts  in  cities  are  always  very  large, 
whereas  in  country  banks  they  are  generally  small. 
When  farmers  have  money,  they  usually  keep  it  in  their 
own  possession  until  they  have  occasion  to  pay  it  out. 
The  inhabitants  of  large  cities  deposit  their  ready  money 
in  banks,  and  pay  it  out  by  giving  checks  on  the  banks. 
Most  of  the  contracts  in  large  cities  are  paid  in  this  way. 
The  money  is  kept  on  deposit  for  convenience  and 
safety ;  and  the  owners  can  draw  checks  for  larger  or 
smaller  amounts,  and  thus  avoid  counting  the  money. 
The  holder  of  a  check  has  as  good  a  right  to  draw  specie 
as  the  holder  of  bank-notes.  He  can  draw  the  money 
or  he  can  deposit  the  check  as  if  it  were  money. 


SECTION  V. 

THE  MANAGEMENT  OF  THE  BANKS  AND  THE  EFFECTS  OF 
THEIR  OPERATIONS  UPON  THE  PROSPERITY  OF  TRADE 
AND  PRODUCTIVE  INDUSTRY. 

Our  pi-esent  banking  system,  and  the  present  legal  rates 
of  interest,  even  with  the  fairest  and  best  management, 
are  a  powerful  means  for  the  unjust  accumulation  of 
wealth.  But  looking  a  little  deeper  into  the  subject,  and 
observing  how  the  business  of  the  banks  is  conducted, 
we  shall  find  that  their  unavoidable  evil  tendencies  are 
greatly  augmented  by  the  manner  in  which  they  are  con- 
trolled and  directed. 


220         MANAGEMENT  OF  THE  BANKS. 

The  banks  are  empowered  to  lend  two  and  a  half  times 
their  capital.  They  have  no  legal  right  to  exceed  this 
sum,  but  they  may  expand  and  contract  their  loans  as 
much  as  they  please  within  this  limit.  They  can  discount 
notes  at  longer  or  at  shorter  dates.  They  sometimes 
discount  notes  having  six,  eight,  ten  and  twelve  months 
to  run,  and  then  suddenly  stop  discounting  any  having 
over  ninety  days  to  run.  They  can  make  money  very 
abundant,  or  very  scarce.  The  banks  can  make  good 
indorsed  notes  sell  in  Wall  street  at  a  discount  of  one, 
two,  or  three  per  cent,  a  month  ;  or  they  can  make  money 
so  plenty,  that  the  same  quality  of  paper  will  sell  at  less 
than  a  half  per  cent,  a  month.  They  can  make  the  business 
of  the  nation  prosperous,  and  make  labor  command  good 
prices,  or  they  can  so  greatly  curtail  business  that  the 
industrious  laborer  will  be  compelled  to  beg  his  living. 

When  a  bank  is  extending  its  discounts,  it  will  hold 
out  inducements  to  merchants  and  mechanics  to  open 
accounts  with  it,  being  glad  to  discount  for  them  to  any 
reasonable  amount.  The  merchant  and  the  mechanic 
open  accounts,  and  perhaps  for  a  considerable  time  the 
paper  which  they  offer  is  discounted  at  the  legal  interest 
of  seven  per  cent.  They  are  well  satisfied,  although  the 
bank  discounts  for  brokers  and  large  capitalists  at  four, 
five,  and  six  per  cent,  per  annum,  while  it  charges  them 
seven  per  cent.  But  suddenly  there  is  an  apparent  scar- 
city of  money,  and  the  bank  declines  discounting  the 
paper  of  merchants  and  mechanics  at  long  dates.  The 
applicants  inquire  of  the  officers  the  reason  of  this  refusal. 
They  are  answered,  that  money  is  becoming  scarce,  and 
that  the  bank  discounts  but  one-half  the  paper  offered. 
In  reality  the  amount  of  money  is  not  in  the  least  dimin- 
ished, nor  the  amount  of  discounts  required  increased 
but  the  banks  and  the  capitalists  keep  it  in  their  own 
possession  to  make  the  money-market  tighter,  that,  they 
may  reloan  to  the  business  community  at  higher  rates. 


MANAGEMENT  OF  THE  BANKS.         221 

If  for  two  days  they  discount  only  one-half  their  usual 
amount  of  paper,  it  is  felt  in  the  money-market.  Those 
who  are  disappointed  in  obtaining  discounts,  must  pro- 
cure money  elsewhere.  They  are  driven  to  brokers  and 
large  capitalists,  and  are  obliged  to  pay  perhaps  twelve 
per  cent,  per  annum  for  money  which  has  been  borrowed 
by  favored  brokers  and  capitalists  at  seven  per  cent,  per 
annum. 

The  merchant  and  the  mechanic  again  offer  at  bank 
for  discounts,  and  are  a  second  time  disappointed.  Upon 
inquiry  they  are  again  informed  that  money  is  becoming 
very  scarce,  and  that,  besides,  in  looking  over  their  depo- 
sit accounts,  the  officers  find  theirs  small,  and  that  others 
who  keep  much  larger  accounts  are  now  asking  for  dis- 
counts. The  merchant  and  the  mechanic  reply  that  they 
have  heretofore  kept  good  balances,  and  should  be  glad 
to  continue  them,  if  the  bank  would  discount  for  them. 
But  they  are  told  that  their  balances  were  never  as  large 
as  those  kept  by  certain  capitalists  and  brokers,  who, 
although  they  kept  large  balances,  seldom  asked  for  dis- 
counts. Now,  as  money  is  scarce  in  the  market,  and 
they  need  discounts,  the  bank  must  favor  them,  for  it  is 
bound  to  attend  to  its  own  interest,  and  merchants  and 
mechanics  must  attend  to  theirs.  In  these  hard  times 
the  banks  must  discount  for  those  who  keep  the  largest 
deposits,  and  offer  the  best  secured  paper,  as  merchants 
and  mechanics  will  sell  their  wares,  or  goods,  to  those 
customers  who  serve  their  interests  best.  It  is  as  much 
the  duty  of  the  banks  to  consult  their  interest,  and  the 
interest  of  the  stockholders,  as  it  is  that  of  merchants  and 
mechanics  to  consult  their  interests,  and  the  interests  of 
their  families.  This  reasoning  sounds  plausible  enough, 
and  seems  to  satisfy  the  people.  If  the  articles  dealt  in 
by  both  parties  were  the  actual  productions  of  labor,  and 
neither  of  them  was  created  by  law,  these  arguments 
would  have  some  force.  Or  if  any  man  who  had  a  pack- 


222         MANAGEMENT  OF  THE  BANKS. 

age  of  calicoes  could  issue  paper-money  bearing  no  inter- 
est, and  pay  his  debts  with  it,  and  the  mechanic  could 
make  a  paper  representative  of  his  steam  engine  pass  as 
money  as  easily  as  a  bank  can  engrave  and  sign  bank- 
notes, and  make  them  pass  as  money,  this  reasoning 
might  be  sound.  But  when  the  article  traded  in  by 
banks  is  a  legal  tender  for  debts,  or  is  of  necessity  used 
as  such,  and  the  articles  dealt  in  by  others  are  the  pro- 
ducts of  labor,  and  not  a  tender,  nor  used  as  a  tender  in 
payment  of  debts,  then  such  arguments  are  false  and 
ought  to  be  powerless.  They  do  not  bear  upon  the  facts ; 
for  the  holders  of  the  products  of  labor,  or  of  their  avails, 
are  dependent  upon  the  banks  who  make  and  possess  the 
money  which  is  a  product  of  law.  It  requires  little  labor 
to  create  millions  of  dollars.  The  labor  to  make  a  five 
thousand  dollar  bank-note  is  the  same  as  to  make  a  one 
dollar  note.  But  the  difference  of  labor  between  raising 
five  thousand  bushels  of  wheat,  and  one  bushel,  is  very 
great.  Yet  the  bank-note  for  five  thousand  dollars  is  as 
much  legally  worth  five  thousand  times  more  than  the 
one  dollar  bill,  either  to  lend  upon  interest,  or  to  pur- 
chase products,  as  the  five  thousand  bushels  of  wheat 
are  actually  worth  five  thousand  times  more  than  one 
bushel. 

But  to  return.  The  applications  of  the  merchant  and 
the  mechanic,  at  bank,  for  discounts  are  refused.  The 
paper  they  had  discounted  when  money  was  plenty  is 
maturing,  and  must  be  paid.  Meanwhile,  in  Wall  street 
interest  rises  from  one  to  two  per  cent,  a  month.  Capi- 
talists and  brokers  find  it  very  profitable  to  get  the  notes 
which  they  .buy  at  two  per  cent,  a  month  discounted  at 
seven  per  cent,  per  annum.  The  bank  considers  this 
paper  far  preferable  to  that  of  the  mechanic  and  the  mer- 
chant, because  the  capitalist  or  the  broker,  who  bought 
the  paper,  was  careful  to  have  it  secured  by  good  indor- 
sers  before  the  purchase,  and  offers,  besides,  to  leave  a  cer- 


MANAGEMFNT  OF  THE  BANKS.         223 

tain  portion  of  the  proceeds  on  deposit,  which  the  bank 
can  lend  to  others.  The  refused  applicants  at  bank  have 
no  alternative  but  to  pay  the  two  per  cent,  a  month  to 
the  broker  or  to  the  capitalist.  Capitalists  generally  buy 
notes  through  a  broker,  and  the  broker  receives  a  quar- 
ter per  cent,  on  the  amount,  for  brokerage.  This,  too, 
must  be  paid  by  the  borrowers,  in  addition  to  the  two 
per  cent,  a  month. 

As  money  becomes  more  and  more  scarce,  and  the 
offerings  increase,  the  paper  of  large  capitalists,  and  of 
the  richest  merchants  and  brokers,  is  often  thrown  out, 
and  not  discounted.  If  the  more  humble  applicant,  the 
merchant  or  the  mechanic,  should  again  inquire  why  his 
paper  could  not  be  discounted,  the  officers  of  the  bank 
would  mention  the  names  of  some  of  the  most  wealthy 
men,  whose  paper  they  were  obliged  to  throw  out  for 
want  of  means  to  discount  it.  In  "Wall  street  money  is 
loaned  for  from  two  to  four  per  cent,  a  month,  and  even 
at  these  rates,  the  best  paper  can  be  obtained,  with  bonds 
and  mortgages,  or  bank  and  State  stocks  as  security  for 
the  prompt  payment  of  notes.  Directors  in  banks  who 
are  allowed  by  law  to  borrow  an  amount  equal  to  one- 
third  of  the  bank  capital,  have  an  opportunity  to  borrow 
money  at  the  usual  rates,  and  purchase  State  bonds  and 
other  securities,  at  a  great  discount  from  their  par  value. 
Capitalists  who  lent  out  money  when  it  was  abundant, 
at  six  or  seven  per  cent,  per  annum,  call  it  in,  and  invest 
it  in  State  stocks,  or  in  bonds  and  mortgages,  which  can 
be  purchased  at  ten,  fifteen,  or  twenty  per  cent,  dis- 
count.* 

*  All  who  become  rich  by  speculations  in  bank,  Stale  and  other  stocks, 
gain  their  wealth  at  the  expense  of  the  producing  classes ;  for  no  in- 
creased production  is  made  by  the  changing  market  value  of  these 
stocks.  It  is  clear,  that  when  the  rate  of  interest  is  increased,  the 
gains  of  money-lenders  are  augmented,  and  the  money  gained  will 
buy  a  greater  quantity  of  property  and  labor.  The  increased  gains 


224         MANAGEMENT  OF  THE  BANKS. 

The  apparent  scarcity  of  money  soon  spreads  in  every 
direction  throughout  the  country.  The  banks  in  all  the 
cities  and  towns  shorten  their  discounts,  and  prepare  for 
the  approaching  crisis.  Their  officers  look  over  their 
paper,  and  collect  that  of  the  men  whom  they  thiuk  least 
able  to  pay  their  notes.  Not  that  the  ability  of  these  men 
to  meet  their  engagements  would  be  doubtful  if  money 
were  plenty,  and  at  the  ordinary  rates  of  interest ;  but 
it  is  not  certain  they  could  maintain  their  payments  dur- 
ing a  long  pressure.  The  officers,  therefore,  if  possible, 
collect  all  paper  of  this  description,  and  from  time  to 
time  obtain  more  security  upon  such  as  cannot  be  realized 
in  money.  They  now  lend  money  upon  such  paper  only 
as  they  consider  very  strong  and  well  secured,  and  which 
they  think  will  be  paid  in  full  at  maturity.  The  mechan- 

of  the  lenders  must  be  paid  by  the  borrowers  by  the  productions  of 
their  own  or  of  others'  labor.  The  increased  transfer  of  money  as 
interest  from  borrowers  to  lenders  produces  no  increase  of  property, 
nor  does  the  rise  or  depression  of  stocks  by  speculation,  add  a  frac- 
tion to  the  wealth  of  the  nation ;  yet  a  few  may  become  rich  by  their 
rise,  while  many  will  be  made  poor  by  their  fall.  The  market  value 
of  stocks  is  governed  by  the  market  value  of  money :  if  money  can 
be  loaned  for  a  higher  per  cent,  interest  than  the  stocks  are  paying 
dividends,  they  will  fall  below  their  par  value ;  but  if  money  be 
loaned  at  a  lower  rate  than  the  dividends  on  well  secured  stocks,  the 
stocks  will  rise  above  their  par  value.  If  money  could  be  supplied  at 
all  times,  and  safely  loaned  at  a  uniform  rate  per  cent,  interest,  all 
well  secured  stocks  paying  like  per  centage  dividends  would  be  uni- 
formly at  par,  because  they  would  bring  in  precisely  the  same  income 
as  loans  of  money.  The  value  of  money  is  the  standard  by  which 
the  market  value  of  stocks  is  governed ;  hence  if  the  National 
Government  would  provide  a  means  of  supplying  the  public  with  the 
necessary  amount  of  money  at  a  uniform  rate  of  interest,  the  State 
Bonds  and  all  other  securities  would  be  of  uniform  value ;  conse- 
quently there  would  be  no  inducement  to  make  a  sacrifice  of  one 
class  of  securities  to  invest  in  another,  because  no  advantage  could 
be  gained ;  and  all  these  speculations  in  borrowing  money  at  banks 
at  lower,  and  reloaning  it  at  higher  rates  of  interest,  and  in  the  rise 
and  fall  of  stocks,  would  at  once  and  forever  cease. 


MANAGEMENT  OF  TUB  BANKS.         225 

ics  and  the  merchants  who  have  sold  their  wares  or  goods 
to  the  country,  are  compelled  to  pay  not  only  one,  two, 
three  or  four  per  cent,  a  month  upon  the  money  they 
have  to  borrow,  but  the  scarcity  prevents  the  collection 
of  the  debts  due  by  their  country  customers  ;  and  if  they 
have  had  any  of  their  notes  discounted  before  the  pres- 
sure, they  come  back  upon  them  to  pay  in  addition  to 
their  other  payments.  The  payment  of  these  exorbi- 
tant rates  of  interest  for  the  use  of  money,  is  sufficient 
to  account  for  all  our  commercial  revulsions. 

When  a  scarcity  of  money  commences  in  Wall  street, 
the  offerings  of  paper  to  be  discounted  at  the  banks  are 
greatly  increased,  sometimes  fifty,  sometimes  a  hundred 
per  cent.  The  reason  is  this :  when  banks  stop  discount- 
ing long  paper,  and  confine  their  loans  to  paper  having 
thirty,  sixty,  or  ninety  days  to  run,  in  order  to  maintain 
their  circulations,  the  discounts  must  be  increased  just  in 
proportion  to  the  shortening  of  the  paper.  If  the  banks 
discount  paper  having  only  sixty  days  to  run,  then  in  the 
sixty  days  they  will  collect  in  the  whole  amount  under 
discount.  It'  their  loans  have  on  an  average  only  ten 
days,  then  in  ten  days  they  will  collect  all  their  loans, 
and  will  not  have  a  dollar  under  discount  unless  they  lend 
out  as  well  as  collect  in  daily.  If  they  should  discount 
no  paper  having  more  than  one  day  to  run,  they 'would, 
collect  in  all  their  loans  every  day,  and  must  reloan  the 
same  amount  daily  to  maintain  their  circulations.  There- 
fore, it  is  evident  that  if  the  banks  maintain  their  lines  of 
discount  they  must  be  increased  exactly  in  proportion  to 
the  shortness  of  the  paper  that  is  discounted.  Suppose 
a  merchant  has  $1,000  to  pay,  and  holds  a  business  note 
for  $1,000,  payable  in  six  months.  To  obtain  a  discount 
he  is  compelled  to  procure  another  note,  having  not 
more  than  sixty  days  to  run.  At  the  end  of  sixty  days 
he  must  procure  a  second  discount  for  a  thousand  dollars 
to  pay  the  first,  and  in  sixty  days  more  a  third  to  pay  the 
10* 


226         MANAGEMENT  OF  THE  BANKS. 

second.  In  six  months  he  is  obliged  to  procure  three 
loans  of  a  thousand  dollars  each,  and  pay  three  thousand 
dollars,  whereas,  if  the  bank  had  discounted  the  six 
months'  note  he  would  have  procured  but  one  discount 
for  a  thousand  dollars.  Consequently,  during  the  six 
months  he  would  have  offered  but  one-third  as  much 
paper  at  bank,  and  but  one-third  as  much  money  would 
have  been  required  to  make  his  payments. 

The  interest  on  money  will  sometimes  rise  in  a  few 
months  from  six  or  seven  per  cent,  per  annum,  to  two  or 
three  per  cent,  a  month.  In  1837,  a  broker  in  Wall 
street  sold  the  post-notes  of  the  Delaware  and  Hudson 
Canal  Bank,  having  four  months  to  run,  at  a  discount  of 
five  per  cent,  a  month ;  and  sold  more  notes  the  next 
day,  for  the  same  person,  at  six  and  a  quarter  per  cent. 
a  month.  Six  and  a  quarter  per  cent,  a  month,  for  four 
months,  would  take  one-fourth  from  the  principal  of  the 
note.  This  is  equivalent  to  compelling  a  tenant  to  pay 
in  advance  one-fourth  of  the  value  of  a  house,  or  farm, 
for  the  use  or  rent  of  three-fourths  during  a  period  of 
four  months,  at  the  end  of  which  he  is  responsible  for 
the  return  of  the  whole ;  for  the  return  of  the  fourth  of 
which  he  had  not  the  use,  as  well  as  of  the  three-fourths 
which  were  in  his  possession.  The  borrower  of  the 
money  received  but  three-fourths  of  the  par  value  of  the 
notes.  If  at  the  end  of  the  four  months,  when  the  post- 
notes  became  due,  the  bank  had  not  paid  them,  the 
borrower  would  have  been  bound  to  pay  their  par  value. 
As  well  might  the  tenant  pay  as  exorbitant  a  rent  for  a 
house  or  a  farm,  as  the  borrower  of  money  so  high  a  rate 
of  interest.  These  high  rates  of  interest  are  not  paid  by 
all.  Doubtless,  favorites  at  bank  could  and  did  borrow 
money  the  same  day  in  Wall  street  at  seven  per  cent. 
per  annum.  The  Delaware  and  Hudson  Bank  was 
solvent  and  good  at  the  period  named,  and  has  so  con- 
tinued. At  their  maturity,  if  not  before,  the  post-notes 


MANAGEMENT  OF  THE  BANKS.          227 

were  paid.  The  money  lent  at  six  and  a  quarter  per 
cent,  a  month  was  no  better  than  that  lent  at  seven  per 
cent,  per  annum.  Take  from  a  $1,000  post-note  $250, 
and  there  remains  $750,  of  which  the  borrower  had  the 
use  for  four  months,  by  paying  the  lender  $250.  The 
favored  one  who  borrowed  at  bank  $750  at  seven  per  cent, 
interest  per  annum,  paid  for  its  use  for  four  months 
$18  40.  The  first  borrower  paid  thirteen  times  more 
than  the  second  for  the  use  of  the  same  article,  in  the 
same  street,  and  on  the  same  day.  Neither  bought  any- 
thing but  the  use  of  the  principal,  for  at  the  end  of  the 
period  the  principal  was  returned  to  its  owner.  A  man 
who  was  obliged  to  borrow  money  was  charged  thirteen 
times  more  than  one  who  had  no  use  for  it  except  to 
gain  the  difference  in  interest.  This  procedure  was  as 
unjust  as  it  would  have  been  to  charge  men  suffering  for 
food  $6  50  a  bushel  for  potatoes,  and  to  charge  those 
who  possessed  an  abundance  only  fifty  cents.  Such 
exactions  do  not  occur  in  sales  of  products,  but  it  is  no 
uncommon  thing  in  Wall  street  for  money  to  be  lent  to 
the  needy  at  a  quarter  per  cent,  a  day,  or  ninety  per  cent, 
a  year,  which  is  fourteen  times  more  than  the  banks  are 
allowed  to  charge  for  discounting  short  paper.  If  a 
government  agent  should  be  directed  to  sell  a  quantity 
of  flour  to  a  needy  people  at  six  dollars  per  barrel,  but 
for  certain  considerations,  should  sell  it  all  to  a  capitalist, 
knowing  that  he  would  compel  the  people  to  pay  $90  a 
barrel  or  starve,  it  would  be  similar  to  the  abuse  of  the 
power  conferred  on  the  banks,  and  wielded  by  them  in 
favor  of  capital, 

Some  of  the  large  capitalists  in  the  city  of  New  York, 
during  the  years  included  between  1836  and  1840, 
bought  up  bonds  and  mortgages  perfectly  well  secured, 
and  bearing  six  and  seven  per  cent,  interest,  at  from  ten 
to  thirty-three  and  a  third  per  cent,  discount  from  their 
par  value.  They  also  bought  millions  of  dollars'  worth 


228         MANAGEMENT  OF  THE  BANKS. 

of  well  indorsed  notes  at  from  one  and  a  half  to  five  per 
cent,  a  month  from  the  face  of  the  notes.  Some  will  say 
that  the  paper  sold  at  these  rates  was  of  doubtful 
character,  but  such  was  not  generally  the  fact.  Indi- 
viduals of  known  wealth,  extensively  engaged  in  business, 
and  hi  want  of  money,  sold  large  amounts  of  their  paper 
indorsed  by  men  in  equally  good  standing,  at  three  per 
cent,  a  month  discount.  These  notes  were,  to  say  the 
least,  quite  as  safe  as  the  bank-notes  for  which  they  were 
exchanged. 

The  following  illustration  will  show  the  bearings  of 
these  speculations  in  money  upon  the  welfare  of  the  pro- 
ducing classes.  H.  is  a  wealthy  broker,  and  a  bank 
director.  His  income,  as  also  the  income  of*  the  bank, 
depends  upon  the  interest  on  money.  He  is  worth 
$100,000.  $20,000  of  which  are  in  bank  stock.  He  uses 
$80,000  as  a  broker  in  buying  mercantile  paper.  Sup- 
pose him  to  be  able  to  effect  a  change  in  the  rate  of 
interest,  from  six  per  cent,  per  annum,  to  two  per  cent. 
a  month,  and  the  interest  on  his  $80,000  will  be  increased 
from  $4,800,  to  $19,200,  making  a  clear  gain  of  $14,400. 
At  the  bank  in  which  he  is  a  director,  and  at  other  banks 
he  obtains  discount  for  $80,000,  at  six  per  cent,  interest 
per  annum,  on  short  paper,  and  pledge  of  his  bank  stock. 
Loaning  this  at  two  per  cent,  a  month,  he  makes  a  clear 
gain  of  $14,400  more,  making  with  the  former,  in  one 
year,  a  clear  gain  of  $28,800  over  the  six  per  cent,  inter- 
est. By  the  rise  of  interest  from  six  per  cent,  per 
annum  to  two  per  cent,  a  month,  II.  increases  his  income 
from  $6,000  to  $34,800.  This  increase  is  paid  to  him  by 
merchants  for  money  to  meet  their  engagements,  and, 
consequently,  their  debts  are  increased  this  sum.  If 
interest  had  remained  at  six  per  cent.,  the  broker  would 
not  have  borrowed  of  the  banks,  for  there  Avould  have 
been  no  inducement  to  borrow  money  which  he  could 
not  reloan  at  a  higher  rate  of  interest.  The  money 


MANAGEMENT  OF  THE  BANKS.          229 

would,  therefore,  have  been  loaned  by  the  banks  directly  to 
the  merchants  at  six  per  cent,  per  annum,  and  the  merchants 
would  have  saved  $28,800,  which  they  paid  to  the  broker. 

When  the  banks  curtail  their  discounts,  numerous  con- 
tracts depending  on  their  loans  must  lie  over  unpaid. 
Those  who  are  desirous  of  meeting  their  engagements 
will  suffer  themselves  to  be  defrauded  in  the  rate  of  in- 
terest, rather  than  have  their  paper  protested  ;  for  in  a 
large  city,  if  their  paper  lies  over,  their  credit  is  gone, 
and  their  business  ruined.  They  are  compelled  to  pay 
these  exorbitant  rates  of  interest,  however  sensible  they 
may  be  of  the  injustice.  Good  and  evil  are  not  set  before 
them  to  choose  between  ;  but  two  evils  are  placed  before 
them,  and  they  must  choose  one  or  the  other.  If  they 
wish  to  do  right,  they  will  choose  the  one  which  they 
think  will  do  the  least  injury  to  themselves  and  their 
neighbors  ;  but  to  one  or  the  other  of  the  evils,  to  usurious 
interest  or  to  bankruptcy,  they  are  compelled  to  submit. 

Such  are,  however,  by  no  means  all  the  evil  conse. 
quences  of  speculations  in  money.  Money  is  the  standard 
of  value,  by  which  the  products  of  the  soil,  ah1  merchan- 
dise, and  the  labor  of  the  people  are  estimated.  The  in- 
comes from  labor  and  products  diminish  in  proportion  to 
the  increase  of  the  income  from  money.  The  change  of 
the  rate  of  interest  compels  the  producers  to  labor  four 
times  more  to  clear  $100,  than  before  the  rise  of  interest. 
Each  sum  of  $100  contained  in  the  $28,800  gained  by  the 
broker,  will  purchase  as  many  products  of  labor,  as  the 
$100  gained  by  the  four-fold  toil  of  the  producers  ;  and 
yet  the  broker  has  done  nothing  to  aid  production  or  dis- 
tribution, but  has  retarded  both.  City  merchants  sell 
goods  to  country  merchants,  and  country  merchants  sell 
them  to  farmers  and  mechanics,  from  whom  they  must 
collect  the  money.  But  the  diminished  price  of  products 
puts  it  out  of  the  power  of  the  mechanics  and  farmers  to 
pay,  and  thus  the  merchants  are  bankrupted.  Meanwhile 


230         MANAGEMENT  OF  THE  BANKS. 

brokers  and  capitalists,  who  are  neither  engaged  in  pro- 
ductive labor,  nor  in  the  distribution  of  products,  grow 
rich  on  the  spoils.  They  are  reverenced  for  their  wealth, 
while  mechanics,  farmers  and  merchants,  who  have  be- 
come correspondingly  poor,  are  despised  for  their  poverty, 
and  blamed  for  being  unable  to  fulfil  their  engagements. 

The  nature  of  money  is  not  understood  by  the  public, 
nor  by  the  farmers,  mechanics,  and  the  great  masses  of 
the  laboring  classes  ;  for  if  they  did  un  derstand  it,  they 
certainly  never  would  submit  to  its  overwhelming  and 
oppressive  power.  The  newspapers  in  the  City  of  New 
York  devote  several  columns  daily  to  giving  the  state  of 
the  money  market,  the  prices  of  various  stocks,  and  their 
fluctuations  from  day  to  day,  according  to  the  state  of 
the  money  market.  Now  if  money  were  properly  insti- 
tuted and  regulated,  there  would  never  be  such  a  thing 
as  a  money  market.  There  would  be  a  market  for  the 
productions  of  labor ;  and  these  would  doubtless  vary 
more  or  less  in  their  market  value  or  price,  but  there 
would  be  no  variation  in  the  market  value  of  money.  It 
is  as  unreasonable  for  people  to  gain  great  wealth  by 
fluctuations  in  the  market  value  of  money  as  it 
would  be  for  them  to  gain  great  wealth  by  fluctua- 
tions in  the  length  of  the  yard.  Money  is  as  much 
a  standard  of  value  as  the  yard  is  of  length  ;  and  devia- 
tions in  the  market  value  of  money  are  as  much  a 
fraud  upon  the  public  as  deviations  in  the  length,  weight 
and  size  of  other  measures.  No  matter  how  long  this 
gross  wrong  has  been  practised  upon  all  nations,  it  is  no 
less  an  evil ;  and  it  has  shown  itself  to  be  such  by  the 
centralization  of  wealth  in  every  nation,  and  the  poverty 
of  the  people  whose  labor  has  produced  the  wealth. 

It  is  now  quite  generally  admitted  that  money  is  only 
a  representative  of  value ;  and  we  presume  many  of  the 
writers  of  the  money  articles  in  our  daily  papers  would 
acknowledge  that  its  value  is  only  representative.  Yet 


MANAGEMENT  OF  TUB  BANKS.         231 

in  the  next  breath  they  will  tell  you,  that  the  country  is 
rich  in  all  the  productions  of  labor,  but  what  the  people 
need  is  capital  to  get  their  products  to  market :  that  the 
manufacturers  have  plenty  of  goods,  but  there  is  a  great 
want  of  capital  to  buy  them,  and  therefore  there  is  no 
market  for  the  goods — just  as  if  the  money  was  the 
actual  capital,  and  the  labor  and  the  productions  of  labor, 
merely  represented  the  value  of  the  money.  The  reason 
why  money  thus  appears  to  be  the  real  capital  is,  that  all 
agreements  for  the  sale  or  the  exchange  of  property  are 
founded  upon  it,  and  it  must  be  had  to  meet  the  payment 
of  these  debts,  for  nothing  else  is  legally  competent  to 
pay  them.  When  money  has  been  made  by  law  a 
standard  of  value  and  a  tender  in  payment  of  debts,  it  has 
the  entire  control  over  the  value  of  the  labor  and  property 
of  the  nation.  The  money  has  legal  value,  but  pro- 
perty and  labor  have  no  legal  value,  and  are  solely  de- 
pendent upon  the  value  and  power  of  the  money.  Hence 
we  often  see  a  nation  in  great  prosperity,  the  labor  busily 
employed,  and  all  branches  of  business  remunerative. 
But  suddenly  there  comes  up  a  crisis  in  the  money 
market,  and  the  business  of  the  nation  is  prostrated. 
The  power  of  money  has  brought  a  blight  upon  trade  and 
industry.  Money  has  suddenly  become  worth  every- 
thing, and  the  laborers  have  suddenly  become  beggars  in 
the  streets  of  our  cities,  and  the  products  of  labor  almost 
worthless  in  the  market. 

The  following  illustration  shows  the  effect  of  differing 
rates  of  interest  in  different  sections  of  the  country.  A 
merchant  in  New  York  for  goods  sold,  holds  a  $1,000 
note  against  a  merchant  in  Alabama,  which  note  he 
indorses  and  has  discounted  at  bank.  The  southern 
merchant  is  not  able  to  take  it  up  when  due,  and  it  is 
returned  to  the  New  York  merchant,  who,  to  preserve 
his  credit  as  indorser,  must  raise  the  money  and*  pay  it. 
Money  is  so  scarce  that  he  is  obliged  to  sell  a  note  hav- 


232         MANAGEMENT  OF  THE  BANKS. 

ing  six  months  to  run,  at  a  discount  of  three  per  cent,  a 
month.  The  Alabama  customer  had  abundant  means  to 
pay  his  debts,  but  the  scarcity  of  money  made  it  impos- 
sible for  him  to  pay  the  note  when  it  was  due.  Some 
time  elapses,  and  the  New  York  merchant  sends  out  the 
note  for  $-1,000  to  Alabama  for  collection.  Meanwhile, 
until  the  note  is  collected,  he  must  borrow  the  money  at 
three  per  cent,  a  month.  He  raises  the  money,  and  pays 
the  returned  notes  by  selling  other  notes  having  six 
months  to  run  at  a  discount  of  three  per  cent,  a  month. 
Discounts  thus : 

Note  at  six  months $1,219  61 

Three  per  cent,  a  month  off  for  six  months  is  eighteen  per 

cent...  , ....          21951 


$1,000  00 

The  note  for  $1,219  51  falls  due,  and  he  sells  another 
note  having  six  months  to  run  at  three  per  cent.,  and 
with  the  proceeds  takes  up  the  first  note. 

Note $1,48720 

Three  per  cent,  a  month  for  six  months=eighteen  per 

cent...  267  69 


$1,219  51 

This  note  falls  due,  and  he  sells  another  six  months' 
note  at  three  per  cent.,  and  with  the  proceeds  takes  up 
the  second  note  for  $1,487  20. 

Note $1,813  55 

Three  per  cent,  a  month  for  six  months = eighteen  per 

cent 326  35 

$1,487  20 

This  note  falls  due,  and  he  sells  another  six  months' 
note  at  three  per  cent.,  and  with  the  proceeds  takes  up  the 
third  note  for  $1,813  55.* 


MANAGEMENT  OF  THE  BANKS.         233 

Note $2,21164 

Three  per  cent,  a  month  for  six  months=eighteeu  per 

cent 398  09 

$1,813  55 

This  note  falls  due,  and  he  sells  another  six  months' 
note  at  three  per  cent.,  and  with  the  proceeds  takes  up 
the  fourth  note  for  $2,211  64. 

Note $2,697  11 

Three  per  cent,  a  month  for  six  months^:  eighteen  per 

cent 48547 

$2,211  64 

Two  and  a  half  years  have  elapsed  since  the  note  hi 
Alabama  fell  due.  Being  disappointed  in  its  collection, 
the  New  York  merchant,  to  save  his  credit,  has  raised 
and  paid  the  money  for  two  and  a  half  years.  From  this 
has  grown  the  note  now  due  for  $2,697  11.  The  Ala- 
bama merchant  pays  every  dollar  of  this  note  with  inter- 
est and  costs  in  New  York  current  funds.  Thus : 

Note $1,000  00 

Two  and  a  half  years'  interest  at  seven  per  cent 175  00 


$1,175  00 

From  the  increased  note  of  the  New  York  merchant. . . .     $2,697  11 
Deduct  the  note  and  interest  received  from  the  Alabama 

merchant 1,17500 

Balance  due  by  New  York  merchant $1,52211 

The  difference  of  interest  on  $1,000  for  two  and  a  half 
years,  causes  a  loss  to.,  the  New  York  merchant  of 
$1,522  11.  The  interest  amounts  to  more  than  one  and 
a  half  times  the  principal.  The  dollar  is  said  to  be  the 
product  of  labor ;  but  is  this  difference  of  interest  the 
product  of  labor,  or  is  it  a  change  in  the  measure  of 
value  ?  Certainly,  if  the  Alabama  measure  and  the  New 
York  measure  were  the  same,  the  debts  would  balance 


234:  MANAGEMENT   OF   THE   BANKS. 

each  other.  They  balanced  each  other  two  and  a  half 
years  before,  but  in  this  period  the  thousand  dollars  in 
New  York  have  increased  $1,697  11,  while  $1,000  in  Ala- 
bama, during  the  same  time,  have  increased  but  $175. 
One  has  accumulated  nine  and  a  half  times  more  than  the 
other.  The  Alabama  merchant  pays  all  he  owes  the  New 
York  merchant,  and  the  latter  appropriates  it  to  the  pay- 
ment of  the  $1,000  which  he  raised  to  take  up  the  note 
of  the  southern  merchant ;  but  he  still  owes  on  this 
transaction  $1,522.  The  third  person  who  gets  the 
$1,522,  gains  it  without  producing  or  distributing  any 
products. 

The  following  table  exhibits  the  discounts  on  six 
months'  notes  for  a  term  of  sixty  years.  A  thousand  dol- 
lars in  money  are  taken,  and  with  this  sum  a  note  payable 
at  six  months  is  discounted.  When  the  first  note  is  paid, 
a  second  note  having  six  months  to  run  is  discounted 
with  its  proceeds,  and  a  third  note  with  the  proceeds  of 
the  second.  This  calculation  is  continued  on  six  months' 
notes  for  sixty  years.  The  table  shows  the  accumulation 
on  $1,000  for  sixty  years,  at  the  various  rates  of  1,2,  3, 
4,  5,  6,  7,  8,  12,  18,  24,  and  30  per  cent,  per  annum,  tak- 
ing off  the  discount,  as  is  always  done  by  banks  and  bro- 
kers. The  highest  rate  calculated  is  thirty  per  cent,  per 
annum,  or  two  and  a  half  per  cent,  a  month,  a  rate  not 
nearly  so  high  as  is  often  paid  hi  Wall  street. 


MANAGEMENT  OF  THE  BANKS. 


235 


TABLE    OF    DISCOUNTS. 


SHOWING  THE  ACCUMULATION  ON  $1,000  FOR  A  PERIOD  OK  SIXTY 
YEARS  BY  DISCOUNTING  NOTES  HATING  SIX  MONTHS  TO  RUN,  AT 
1,  2,  3,  4,  6,  6,  7,  8,  12,  18,  24,  AND  80  PER  CENT.  PER  ANNUM. 


1  PER  CI 

NT. 

6  PER  CENT. 

12  PER  CENT. 

10  years  .... 

$1,105  45 

10  years 

$1,65924 

10  years             $8,447  18 

20     "       ... 

1,222  02 

20     " 

2,753  06 

20      "                  11,881  90 

80     "       ... 

1,850  87 

80     " 

4,56797 

80     "                  40,957  07 

40     " 

1,493  88 

40     " 

7,579  83 

40     "               141,177  95 

60     " 

1,650  78 

50     " 

12,575  87 

50     "                486,644  91 

60     "       ... 

1,824  87 

60      " 

20,866  35 

60     "            1,677,481  45 

2  PER  CENT. 

6  PER  CENT. 

IS  PER  CENT. 

10  years  

$1,222  64 

10  years 

$1,838  93 

10  years             $6,594  35 

20     "      ...   . 

1,494  83 

20     " 

8,381  66 

20     "                  48,485  48 

80      "     

1,827  63 

80     " 

6,21865 

30      "                286,758  62 

40     "      

2,234  52 

40     " 

11,43567 

40     "             1,890,988  71 

50     "      

2,732  00 

60     " 

21,02989 

60     "           12,469,831  63 

60      "      

8,340  23 

60     " 

88,671  58 

60     "           82,230,496  79 

8  PER  CENT. 

7  PER  CENT. 

24   PER  CENT. 

10  years  

$1,852  93    10  years 

$2,039  17 

10  years            $12,892  78 

20     "      
80     "      

1,830  46    20     " 
2,476  43    80     " 

4,15322 
8,479  82 

20     "                166,228  76 
30      "             2,143,0*6  89 

40     "      

3,850  44    40     " 

17,29079 

40      "           27,630,338  24 

50     "      

4,532  91    50     " 

85,25390 

50      "         856,231,914  18 

60     "      

6,182  78  j  60     " 

71,89892 

60     "      4,592,819,317  86 

4  PER  CKXT. 

8 

PER  CENT. 

30  PER  CENT. 

10  years  

$1,497  89    10  years 

$2,262  43 

10  years            $25,800  11 

20     -     

2,243  66    20     " 

5,118  59 

20     "               665,645  68 

80     "     

8,360  75    80      " 

11,5SO  46 

80     "           17,173,781  66 

40     "      

5,034  01    40     " 

26,16997 

40     "         443,084,165  99 

50     "      

7,540  86    60     " 

59,275  70 

50     "    11,431,620,222  06 

60     "      

11,294  60    60      " 

184,107  05 

60     "  294,936,059,207  87 

In  the  foregoing  table  it  appears  that  interest  at  one 
per  cent,  would  transfer  $824  worth  of  the  products  of 
labor  to  the  capitalists  to  pay  for  the  use  of  $1,000  for 
sixty  years ;  at  six  per  cent.,  $37,671  58 ;  at  seven 
per  cent.,  $70,898  92  ;  and  at  thirty  per  cent.,  $294,- 
936,058,207  37.  In  any  community  the  rise  of  the  rate 
of  interest  on  all  the  money  used,  whether  for  a  longer 
or  a  shorter  period,  transfers  from  producers  to  capitalists 
a  sum  proportioned  to  the  increase  of  the  rate  per  cent., 
as  demonstrated  in  this  table. 


ZOO         MANAGEMENT  OF  THE  BANKS. 

When  money  becomes  scarce,  and  interest  rises  to  ex- 
orbitant rates,  the  rates  of  exchange  between  one  city 
and  another,  and  between  one  State  and  another,  always 
increase.  These  exchanges  are  merely  a  cover  under 
which  the  banks  obtain  a  higher  rate  of  interest  than  the 
one  allowed  by  law,  and  a  means  to  enable  them  greatly 
to  increase  their  dividends.  In  1836,  the  banks  in  New 
York  began  to  do  a  business  of  considerable  amount,  by 
collecting  notes  on  the  South  and  "West,  and  charging 
various  rates  of  exchange,  from  one  to  three  or  four  per 
cent.  The  discount  at  seven  per  cent,  on  a  note  having 
three  months  to  run,  would  be  one  and  three-quarters 
per  cent. ;  and  by  charging  three  per  cent,  exchange  on 
Georgia  or  other  southern  States,  it  would  amount  in 
the  three'  months,  to  four  and  three-quarters  per  cent. 
If  their  money  was  returned  free  of  expense,  these  ex- 
changes were  much  more  profitable  to  the  banks  than 
lending  money  at  seven  per  cent,  interest  per  annum.  To 
secure  the  return  of  the  money  without  loss  or  trouble, 
when  another  person  applied  for  a  discount  of  a  note 
payable  in  New  York,  it  was  very  easy  to  tell  him  that 
the  bank  could  not  discount,  that  its  funds  were  locked 
up  in  Georgia  or  elsewhere,  and  that  if  he  were  willing  to 
take  a  draft  on  a  Georgia  bank,  it  would  discount  his  note. 
Being  compelled  to  have  the  money  or  break,  the  appli- 
cant would  take  the  draft  on  Georgia,  and  through  a 
broker  sell  it  in  market.  If  the  bank  did  not  then  buy 
the  draft  back  at  a  discount  of  three  or  four  per  cent.,  at 
all  events  by  the  two  transactions  it  would  have  made  its 
funds  payable  in  New  York.  It  would  have  saved  the 
exchange  of  three  per  cent,  on  the  first  note  discounted 
and  this  would  have  amounted  to  about  double  the  legal 
rate  of  interest.  The  banks  sometimes  made  seven  or 
eight  times  more  in  this  way  than  by  interest.  This 
mode  of  exchanging  spread  through  the  Union  ;  and  in 
the  spring  of  1837,  when  the  New  York  banks  and  the 


MANAGEMENT  OF  THE  BANKS.         237 

banks  generally  suspended  specie  payments,  the  rates  of 
exchange  still  increased.* 

To  show  that  the  banks  profited  largely  by  the  em- 
barrassments and  fluctuations  in  1836  and  1837,  we  have 
only  to  notice  the  per  centage  profit  gained  by  them  in 
the  State  of  New  York  at  different  periods.  The 
published  statements  in  the  New  York  Assembly  docu- 
ments show  that  the  average  dividends  of  the  Bank  of 
America,  for  ten  years,  from  1818  to  1828,  were  5.30 
per  cent  annually.  But  in  the  years  1836  and  1837, 
money  was  very  scarce,  and  the  difficulties  of  the  com- 
munity proportionably  great.  During  these  years  the 
profits  of  the  bank  averaged  more  than  16. 14  per  cent, 
annually.  More  in  one  year  of  embarrassment  than 
in  three  years  of  general  prosperity.  The  same  pub- 
lished* statements  of  the  following  six  banks,  viz.,  Bank 
of  America,  City  Bank,  Mechanics'  Bank,  Merchants' 
Bank,  Bank  of  New  York,  and  Union  Bank,  show  a  re- 
sult as  follows.  During  the  same  ten  years,  from  1818 
to  1828,  their  average  dividends  were  5.70  per  cent, 
per  annum.  But  in  the  two  years  1836  and  1837,  their 
profits  were  13.35  per  cent,  annually.  The  same 
statements  rendered  by  fifty-nine  country  banks  in  this 
State,  show  that  in  the  same  two  years,  their  average 
profits  were  1 1 .36  per  cent,  per  annum. 

To  effect  a  rise  of  interest,  it  is  not  necessary  for  the 
banks  to  allow  their  money  to  lie  dormant  any  length  of 
time.  Let  the  New  York  banks  for  one  week  refuse  to 


*  I  know  of  other  instances  where  paper  has  been  discounted  for 
ninety  days  and  drafts  given  on  Philadelphia  at  par,  when  the  ex- 
change on  that  city  was  over  thirteen  per  cent,  discount.  The  parties 
borrowing  had  to  sell  the  Philadelphia  funds  and  lose  this  exchange,  be- 
sides the  interest ;  and  banks  have  discounted  paper,  paying  in  Phila- 
delphia funds  when  at  as  large  discount  as  the  above  mentioned ;  if 
they  have  not  done  this  in  New  York,  it  has  been  done  in  a  neighbor- 
ing State.— Currency,  the  E,'il  ,ind  the  Remedy. 


238         MANAGEMENT  OF  THE  BANKS. 

discount  a  single  note,  and  the  want  of  money  would 
probably  be  as  great,  and  as  severely  felt,  as  during  the 
most  difficult  periods  in  1837.  By  this  refusal  the  banks 
would  only  lose  the  interest  on  the  amount  collected  for 
half  the  week.  But  by  the  end  of  the  week  those  who 
needed  money  would  be  obliged  to  sell  paper  having 
three,  six,  nine,  and  twelve  months  to  run,  at  a  discount 
of  two  or  three  per  cent,  a  month,  and  would  be  sub- 
jected to  a  great  loss.  The  banks  in  the  city  of  New 
York  keep  an  average  of  about  $50,000,000  loaned.  If 
the  notes  thus  discounted  have  an  average  of  fifty-six  days 
to  run,  the  citizens  pay  into  the  banks  six  and  a  quarter 
millions  of  dollars  every  week.  If  for  one  week  the 
banks  should  refuse  to  discount,  and  draw  in  the  six  and 
a  quarter  millions,  they  would  lose  the  interest  on  this 
sum  for  an  average  of  three  and  a  half  days.  This  interest 
at  six  per  cent,  would  amount  to  $3,557  69.  If  this  cur- 
tailment of  the  circulation  for  one  week  should  compel 
merchants  and  mechanics  to  sell  their  business  paper, 
having  but  sixty  days  to  run,  at  two  per  cent,  a  month 
discount,  they  would  lose  four  per  cent,  on  the 
$6,250,000,  i.  e.,  $250,000.  The  merchants  and  the 
mechanics  would  sustain  a  total  loss  of  $187,500  over  and 
above  interest  for  sixty  days,  at  the  rate  of  six  per  cent, 
per  annum  on  $6,250,000.  Let  us  extend  this  calculation, 
and  suppose  the  banks  to  stop  their  discounts  for  two 
weeks,  and  collect  in  their  dues.  In  the  course  of  two 
weeks,  they  would  collect  in  $12,500,000.  They  would 
lose  the  interest  upon  this  sum  for  an  average  of  one  week, 
in  which  time  the  interest  would  amount  to  $14,230  77. 
These  curtailments  would  produce  an  extreme  scarcity 
of  money.  Suppose  the  merchants  and  the  mechanics  to 
be  compelled  to  sell  their  business  paper  having  six 
months  to  run  at  a  discount  of  two  per  cent,  a  month  for 
that  period.  They  would  lose  twelve  per  cent,  on 
$1 2,500,000,  i.  e.,  $1,500,000.  Their  actual  loss  over  and 


MANAGEMENT  OF  THE  BANKS.         239 

above  the  interest,  at  the  rate  of  six  per  cent,  per  annum, 
for  six  months,  would  be  $1,125,000,  while  the  banks 
would  lose  only  $14,230  77.  If,  instead  of  curtailing  their 
discounts,  the  banks  should  refuse  to  loan  to  merchants 
and  mechanics,  and  lend  their  money  to  brokers  and 
capitalists,  who  should  reloan  it  at  the  above  rates  to  the 
people,  the  same  results  would  be  produced  without  any 
loss  of  interest  by  the  banks,  or  any  curtailment  of  their 
discounts.  The  $1,125,000  would  be  lost  to  business  men 
and  gained  by  brokers  and  capitalists. 

The  banks  can  curtail  their  discounts  as  much  and  as 
rapidly  as  they  please  without  violating  the  laws.  In 
1837  and  1838,  there  were  not  only  twelve  and  a  half  mil- 
lions of  dollars  loaned  at  two  per  cent,  a  month,  but 
probably  some  hundreds  of  millions  were  loaned  at  much 
higher  rates.  One  or  two  per  cent,  a  day  was  often  ex- 
torted from  the  needy.  Many  merchants  and  mechanics 
in  New  York  might  be  mentioned,  who  paid  from 
$10,000  to  $50,000  in  extra  interest,  that  is,  interest  over 
seven  per  cent,  before  they  were  compelled  to  suspend 
payment.  Besides,  when  collections  were  made  for 
them  in  the  various  States  by  banks  and  otherwise,  they 
were  subjected  to  great  losses  in  exchanges  on  their 
drafts.  Millions  of  dollars'  worth  of  the  best  paper  was 
sold  at  a  discount  of  three  per  cent,  a  month.  Take  the 
discount  off  in  advance,  at  this  rate,  from  six  months' 
paper,  and  $1,000  will  buy  a  note  for  $1,219  50.  At  the 
maturity  of  this  note,  its  proceeds,  i.  e.,  $1,219  50  will  buy 
a  second  note  having  six  months  to  run  for  $1,487  18.  Thus 
it  is  seen  that  the  indebtedness  of  those  paying  this  rate  of 
interest  was  increased,  in  one  year,  almost  fifty  per  cent, 
on  all  the  money  they  borrowed  to  meet  their  engagements. 

Curtailments  of  bank  discounts,  made  nnder  pre- 
tence of  getting  the  people  out  of  debt,  serve  only  to 
increase  their  indebtedness.  They  inevitably  retard 
the  sale  of  products,  and  destroy  the  regularity  of 


2iO          MANAGEMENT  OF  THE  BANKS. 

business.  If  the  inhabitants  of  the  State  of  New  York 
ordinarily  pay  interest  on  four  hundred  millions  of  dol- 
lars, and  one-half  this  sum,  i.  e.,  two  hundred  millions, 
were  loaned  at  two  per  cent,  a  month,  their  indebtedness 
would  be  increased  on  this  one  item  thirty-six  millions 
of  dollars  above  the  interest  at  six  per  cent,  per  annum ; 
and  this,  too,  without  taking  the  interest  in  advance, 
which  is  usually  done  in  cases  of  this  nature.  In  all 
these  transactions,  by  which  thirty-six  millions  of  dollars 
would  be  taken  from  producers  and  distributers,  and 
transferred  to  capitalists,  there  would  be  no  exchange  of 
products,  and  the  people  would  receive  no  consideration 
for  their  money.  Besides  the  suffering  caused  by  the  in- 
crease of  indebtedness  upon  loans  of  money,  the  prices 
of  products  would  be  greatly  diminished.  Those  sold 
would  not,  perhaps,  cancel  more  than  one-half  the  debts 
that  they  would  if  the  rate  of  interest  had  not  increased. 
Therefore,  the  money  engrossed  by  the  capitalist  would 
be  worth  to  him  double  the  same  sum  at  the  usual  in- 
terest, for  he  could  purchase  with  it  nearly  double  the 
quantity  of  products  that  he  could  under  ordinary  rates. 
A  man  who  owns  a  farm  cannot  rent  it  for  thirty  or 
sixty  days,  and  force  its  return,  and  keep  constantly  re- 
letting  it,  so  as  to  inconvenience  his  tenants ;  because,  in 
these  short  periods  the  farm  would  not  produce  a  crop; 
but  money  will  gather  an  income  when  it  is  loaned  for 
thirty  or  sixty  days,  or  for  one,  two  or  three  days.  Many 
men  now  devote  their  time  to  the  loaning  of  money  for 
one-eighth,  one-quarter,  one-half,  and  one  per  cent,  a  day, 
fixing  a  higher  or  a  lower  rate,  according  to  the  necessity 
of  the  borrower.  In  this  way  they  extort  the  largest 
possible  interest.  This  they  say  they  do  "  to  keep  peo- 
ple from  breaking."  *  Doubtless  many  of  those  engaged 

*  We  feel  confident  in  saying  that  no  intelligent  business  man  in 
the  city  of  New  York  will  doubt,  that  there  have  been  many  millions 
of  dollars  loaned  the  past  week  (Sept.  9th,  1854)  by  the  banks  iu  this 


MANAGEMENT  OF  THE  BANKS.         241 

in  brokerage  are  ignorant  of  the  effects  of  their  stock- 
jobbing and' loaning  operations  upon  the  welfare  of  their 
fellow-men,  and  not  any  of  them  fully  appreciate  the  evils 
they  occasion,  or,  it  is  to  be  hoped,  they  would  cease  to 
pursue  an  employment  so  blighting  to  their  own  moral 
characters,  and  so  pernicious  to  the  welfare  of  others.* 

^In  1837,  rents  on  stores  fell  to  one-half  or  one-quarter 
of  their  former  prices,  and  many  stood  untenanted.  At 
the  same  time,  bank-notes  which  a  year  or  two  before 
could  be  rented  at  but  six  or  seven  per  cent,  per  annum, 
were  rented  at  from  three  to  ten  times  more  than  before, 
although  at  the  former  time  the  bank-notes  were  profess- 
edly based  on  specie,  and  at  the  latter,  no  pretension  of 
this  sort  was  made.  Was  the  rise  of  interest  on  the 
bank-notes,  or  money,  caused  by  an  increase  of  labor  to 

city,  at  the  rates  of  six  and  seven  per  cent,  per  annum.  Nor  will  any 
intelligent  business  man  doubt,  that  several  millions  of  this  same 
money  have  been  reloaned  during  the  week  by  brokers  and  other 
financiers  at  one,  two  and  three  per  cent,  a  month,  and  from  this  rate 
to  a  quarter  per  cent,  a  day.  A  quarter  per  cent,  a  day  is  seven  and 
a  half  per  cent,  a  month,  while  six  per  cent,  per  annum,  is  but  a  half 
per  cent,  a  mouth.  It  makes  a  very  wide  difference  in  the  rent  of 
property,  if  one  pay  seven  and  a  half  times  more  than  another. 
Whether  money  be  loaned  at  a  high  rate  per  cent,  interest  for  one 
day,  one  month  or  for  ten  years,  the  loans  are  all  governed  by  the 
same  principle;  it  is  a  certain  rate  per  cent,  to  be  paid  just 
in  proportion  to  the  time  for  which  the  money  is  borrowed.  There- 
fore if  it  be  just  at  any  time  to  loan  for  a  quarter  per  cent,  a  day,  it 
would  be  equally  just  to  loan  at  the  same  rate  per  cent.,  for  a  month  or 
for  ten  years.  It  is  such  a  notorious  fact  that  money  is  loaned  at 
usurious  rates  of  interest,  that  these  impositions  are  daily  published 
in  the  newspapers  as  a  constant  practice,  and  the  man  who  can  obtain 
the  highest  rate  is  looked  up  to  as  a  first  rate  man  of  business. 
Financiers  talk  of  the  borrowing  and  lending  of  money  at  usurious 
rates  of  interest,  as  if  they  were  buying  and  selling  commodities  at  a 
profit  or  loss.  Yet  the  borrowing  and  lending  money  is  not  buying 
and  selling  money,  any  more  than  renting  and  hiring  a  house  is 
buying  and  selling  the  house. 
*  See  Appendix,  C. 

11 


24:2  MANAGEMENT   OF  THE   BANKS. 

engrave  and  secure  the  notes,  or  was  the  fall  of  rent  on 
stores  caused  by  a  diminution  of  the  number  of  bricks, 
or  the  amount  of  labor  necessary  to  build  them  ?  No  ! 
it  was  an  arbitrary  rise  of  interest  to  increase  the  gams 
of  banks,  brokers,  and  capitalists.  Our  producers  were 
not  idle :  we  had  a  superabundance  of  products  for  our 
market :  yet,  strange  as  it  may  seem,  thousands  in  our 
midst  were  suffering  for  the  very  things  of  which  th*e 
abundance  was  the  subject  of  lamentation.  One  had  raised 
a  surplus  of  some  products,  and  was  in  need  of  surplus 
products  owned  by  others.  But  it  was  nearly  impossible 
to  effect  any  exchange  of  these  products,  on  account  of  the 
scarcity  of  money.  At  this  juncture,  the  situation  of  the 
producers  in  Europe  was  similar  to  that  of  the  producers 
in  the  United  States.  The  Bank  of  England  was  openly 
authorized  to  increase  the  rate  of  interest  on  its  loans  in 
order  to  check  over-production  and  over-trading.  * 

*  Financial  power  is  instituted  by  governments;  and  when  a 
money  crisis  occurs  and  prostrates  business,  governments,  to  be 
consistent,  must  sustain  the  power  they  have  established,  and,  con- 
sequently the  financiers  who  wield  it.  But  the  revulsion  must  be 
attributed  to  some  cause  in  order  to  satisfy  the  public  mind,  and 
financiers  are  always  ready  with  hosts  of  reasons  for  it.  They  will 
tell  you  that  the  people  one  year  produced  too  many  agricultural 
products,  and  next  year  too  few ;  that  another  year  they  manufactured 
too  many  goods,  and  another  year  too  few :  that  another  year  they 
built  too  many  railroads ;  another  year  they  imported  too  many 
goods ;  etc.,  etc.,  etc.  There  is  no  end  to  the  subterfuges  resorted 
to  in  the  endeavor  to  show  that  these  crises  in  the  money  market  are 
caused  by  the  laboring  classes,  either  by  not  producing  enough,  or 
else  by  over-production,  over-trading,  etc.  Yet  all  these  have  never 
really  satisfied  the  public  on  this  subject ;  for  their  common  sense 
tells  them,  that  labor  is  the  producer  of  wealth,  and  that  there  can 
be  no  great  surplus  of  products  unless  this  surplus  remains  after  sup- 
plying every  man,  woman  and  child  with  all  the  necessaries  of  life. 
It  is  no  proof  of  a  surplus,  that  the  merchants  have  their  stores  filled 
with  unsold  goods  when  thousands  of  the  laboring  community  around 
them  are  suiJ'ering  for  the  want  of  these  very  goods,  but  cannot  sell 


MANAGEMENT   OF   THE   BANKS.  24:3 

How  different  would  have  been  the  condition  of  the 
producing  classes  if  the  banks  had  pursued  an  opposite 
course.  If,  instead  of  raising  the  interest  on  their  loans, 
and  increasing  their  dividends  to  double  their  amount  in 
previous  years,  they  had  lowered  the  rate  of  interest  so 
as  to  diminish  their  dividends  to  one-half  their  previous 
amount,  the  prosperity  of  the  producing  classes  would 
have  as  greatly  exceeded  their  prosperity  in  former  years, 
as  it  was  by  the  rise  of  interest  diminished  below  their 
former  prosperity.  The  amount  of  bank  loans  would 
have  been  less.  Probably  money  would  have  circulated 
with  more  than  double  its  former  rapidity.  One  million 
of  dollars  circulating  rapidly  will  accomplish  as  much  in 
a  given  time  as  two  millions  will  if  the  latter  circulate  but 
half  as  fast.  If  in  January,  1836,  the  banks  throughout 
the  Union  had  reduced  their  rate  of  interest  to  four  per 
cent.,  and  had  lent  their  money  to  business  men  for  good 
indorsed  notes,  if  they  had  made  no  loans  on  pledge  of 
stocks  as  security,  or  to  any  one  who  they  knew  desired 
to  lend  the  money  again  at  an  advanced  rate  of  interest, 
business  would  have  been  attended  with  increased  pros- 
perity ;  country  products  would  have  maintained  good 
prices;  the  State  bonds  of  every  State  in  the  Union, 
bearing  an  interest  of  five  per  cent,  per  annum,  would 
have  been  above  par ;  every  State  would  have  paid  the 
interest  on  its  bonds  promptly,  and  in  January,  1837,  the 
people  would  not  have  owed  as  much  by  a  very  large 
amount  as  they  were  compelled  to  owe  under  the  actual 
circumstances.  The  producing  classes  would  have  been 
comparatively  well  off,  and  large  capitalists  would  not 

their  labor  to  pay  for  them.  So  long  as  labor  commands  a  fair  price 
in  money,  there  is  a  ready  market  for  the  products  of  labor ;  and  it 
is  only  high  rates  of  interest  and  a  scarcity  of  money  that  make  labor 
and  the  products  of  labor  unsalable.  Revulsions  in  trade  are 
caused  by  the  money  power,  by  financiers,  and  not  by  the  producing 


244:  MANAGEMENT   OF   THE   BANKS. 

have  become  so  immensely  rich.  State  stocks  would  not 
have  been  crowded  upon  the  market,  nor  would  capital- 
ists have  become  competitors  with  the  business  community 
for  loans  at  banks.  The  producing  classes  cannot  afford 
to  pay  even  four  per  cent,  per  annum,  but  there  would 
be  less  distress  among  them  at  this  rate,,  than  at  six  per 
cent.,  or  a  higher  rate.  Their  subsistence  will  always 
become  scanty  in  proportion  to  the  increase  of  the  rates 
of  interest.* 

If  the  English  government  should  raise  the  interest  on 
its  debt  to  four  per  cent,  the  taxes  of  the  producers  would 
be  increased  in  the  same  proportion.  But  if  it  should 
lower  the  interest  on  its  debt  to  one  per  cent.,  and  com- 
pel the  Bank  of  England  and  all  bankers  to  take  only  one 
per  cent,  on  the  indorsed  notes  of  individuals,  and  to 
make  no  loans  on  pledges  of  stocks  as  security,  the  pro- 
ducing classes  of  England  would  be  elevated,  and  their 
share  of  their  own  surplus  products  would  be  increased 
in  proportion  to  the  diminution  of  the  rate  of  interest. 

The  curtailments  of  bank  discounts  seem  to  be  made 
that  producers  may  know  and  consider  the  great  value 
of  money,  and  the  comparative  worthlessncss  of  the  pro- 
ductions of  labor.  It  would  seem  that  the  principal  wealth 
of  a  nation  may  be  dug  out  of  some  obscure  place  in  the 
earth,  collected  into  a  very  small  compass,  and  placed  in 
the  vaults  of  banks.  It  there  remains  as  inactive  as  it 
was  in  the  mines  before  it  was  excavated.  This  gold  and 
silver  money  gives  power  to  the  banks,  the  B.oard  of 
Brokers  and  a  few  large  capitalists,  to  compel  the  people 
to  cultivate  the  earth,  and  to  gather  and  market  its  pro- 
ductions maiuly  for  their  use,  reserving  for  themselves  of 
the  poorer  kinds  a  bare  subsistence. 

Do  the  fanners,  mechanics,  and  the  laboring  classes  in 
general,  believe  that  the  majority  of  the  surplus  wealth 

*  See  Appendix,  D. 


MANAGEMENT  OF  THE  BANKS.         245 

which  their  labor  yearly  produces,  ought  in  justice  to 
be  owned  at  the  end  of  the  year  by  a  few  financiers  ? 
Does  their  common  sense  teach  them  that  a  few,  for  the 
use  of  the  money  necessary  to  exchange  the  commodities 
produced,  ought  to  gain  double,  treble  or  quadruple  as 
much  of  the  surplus  production  as  those  who  furnish 
the  skill  and  perform  the  labor  to  make  the  produc- 
tion ?  Does  it  accord  with  their  sense  of  justice,  that 
the  bankers,  brokers,  and  financial  stockjobbers  in  the 
city  of  New  York,  should  realize  each  year  more  clear 
gain  in  wealth  than  all  the  agriculturists  and  mechanics 
in  the  State  can  gain  by  their  year's  toil  ?  Do  our  pro- 
ducers and  the  public  generally  really  believe  that  the 
principal  wealth  of  the  nation  is  stowed  away  in  the  vaults 
of  the  banks  in  our  large  cities,  and  that  the  prosperity 
of  this  great  nation  ought  to  depend  on  the  quantity  of 
specie  in  the  vaults  of  these  banks  ?  If  the  people  from 
the  highest  to  the  lowest  do  really  believe  this,  who  can 
wonder  that  the  Babylonians  believed  that  the  golden 
image  set  up  by  Nebuchadnezzar  was  the  true  God,  and 
that  Daniel  deserved  to  be  cast  into  the  lions'  den  for  his 
unbelief;  for  there  was  in  that  golden  image  as  much  of 
the  life-giving  spirit  of  God,  and  ability  to  provide  for 
the  temporal  and  spiritual  necessities  of  its  worshippers, 
as  there  is  now  in  our  gold  and  silver  money  images  to 
provide  for  our  temporal  and  spiritual  support.  The  law 
of  Babylon  which  attributed  to  this  image  the  power  of 
God,  and  commanded  the  people  to  bow  down  in  adora- 
tion before  it,  was  hardly  a  greater  imposition  upon  their 
credulity  and  rights  than  is  now  practised  upon  nations 
by  legally  authorizing  certain  gold  and  silver  images  to 
be  set  up,  and  attributing  to  them  an  innate  value  equiva- 
lent to  that  of  all  other  things.* 
Every  man's  common  sense  must  tell  him,  that  the 

*  See  Appendix,  E. 


246  MANAGEMENT   OF   THE   BANKS. 

present  distribution  of  wealth  is  radically  unjust.  But 
as  similar  wrongs  have  existed  in  every  civilized  nation, 
from  the  earliest  ages,  it  seems  to  be  taken  for  granted 
that  they  are  necessary  evils — in  other  words,  that  there 
can  be  no  remedy  for  them.  Yet  their  continued  exist- 
ence only  proves  that  an  evil  cause  continuing  to  act  will 
continually  produce  its  evil  effects,  and  that  this  cause 
must  be  removed  before  the  evils  will  cease.  Although 
the  effects  produced  are  exceedingly  complicated,  these 
enormous  evils  of  unjust  distribution  originate  in  every 
civilized  nation  from  one  and  the  same  fundamental  cause, 
namely,  the  unjust  and  uncontrolled  power  of  money. 
If  it  be  possible  to  institute  money  with  only  a  just 
power,  and  that  power  such  as  can  be  controlled  and 
regulated  by  national  laws,  the  fundamental  cause  of 
these  evils  can  be  easily  removed.  But  if  it  be  impossi- 
ble thus  to  institute  and  govern  money,  the  fundamental 
cause  cannot  be  removed,  and  the  consequent  evils  are 
entailed  upon  us. 

Nations  have  assumed  that  the  value  of  gold  and 
silver  money  is  innate,  and  have  established  their  mone- 
tary laws  upon  this  false  assumption.  Thus,  according 
to  law,  all  innate  value  is  in  gold  and  silver  money,  and 
there  is  no  innate  value  in  anything  else ;  for  the  laws 
have  made  this  money  a  legal  balance  in  payment  for 
everything  that  is  bought  and  sold,  while  no  other  thing 
is  any  tender  or  legal  balance  in  payment  for  money. 
Neither  is  any  other  thing  a  tender  in  payment  for  any- 
thing that  is  bought  or  sold ;  hence  if  a  value  be  at- 
tached to  anything  besides  money,  it  is  this  innate  value 
of  money  which  must  determine  what  that  market  value 
shall  be  ;  for  other  things  have  no  legal  value  except  by  the 
permission  and  determination  of  this  innate  value  of 
money.  This  innate  value,  assumed  by  law  for  gold  and 
silver  money,  is  not  like  that  of  any  created  thing  in  the 
mineral,  vegetable,  or  animal  kingdom,  for  it  over- 


MANAGEMENT  OF  THE  BANKS.         247 

rules  and  controls  the  value  of  all  these  things.  Accord- 
ing to  our  laws,  it  is  an  independent,  uncreated  power, 
having  an  inherent  right  to  govern  and  settle  the  value 
of  all  things.* 

This  money  power  ia  not  only  the  most  governing  and 
influential,  but  it  is  also  the  most  unjust  and  deceitful  of 
all  earthly  powers.  It  entails  upon  millions  excessive 
toil,  poverty  and  want,  while  it  keeps  them  ignorant  of  the 
cause  of  their  sufferings ;  for,  with  their  tacit  consent, 
it  silently  transfers  a  large  share  of  their  earnings  into 
the  hands  of  others,  who  have  never  lifted  a  finger  to 
perform  any  productive  labor.  The  same  power  has 
grossly  deceived  our  public  teachers  ;  for  not  being  able 
rationally  to  account  for  the  great  inequalities  of  wealth 
and  condition  existing  in  society,  and  being  expected  to 
furnish  a  satisfactory  explanation  in  some  way,  they  tell 
the  people  that  these  great  wrongs  are  providential,  that 
they  are  the  mysterious  workings  of  the  providence  of 
God  :  that  all  these  evils  are  governed  and  controUed  by 
His  power  and  goodness.  This  method  of  accounting 
for  the  gross  political  wrongs  in  society  has  covered  up 
and  hidden  from  view  a  multitude  of  heinous  sins.  Not- 
withstanding the  number  of  those  who  now  live  in  luxu- 
rious idleness,  performing  little,  if  any  useful  labor,  and 
the  great  number  of  those  who  remain  idle  because  the 
scarcity  of  money  renders  it  impossible  for  them  to 
obtain  work,  yet  with  all  these  impediments,  there  is 
generally  enough  produced  each  year  in  each  nation  to 
give  to  every  man,  woman  and  child  a  comfortable  liv- 
ing, f  Every  person  of  common  sense  must  see,  that 

*  See  Appendix,  F. 

f  A  nation  -in  which  each  individual  should  devote  four  or  five 
hours  daily  to  labor  in  useful  production,  would  probably  be 
better  supplied  with  the  comforts  and  luxuries  of  life  than  any 
people  now  on  the  globe.  Not  only  is  a  moderate  amount  of  manual 
labor  necessary  to  the  full  development  and  health  of  the  body,  but 


24:8  MANAGEMENT   OF   THE   BANKS. 

God  in  his  providence  has  bountifully  provided  for  man 
and  that  there  is  some  other  power  working  against  him, 
and  diametrically  opposed  to  the  righteous  distribution 
of  his  bounties.  It  is  the  providence  of  the  national 
laws,  establishing  this  unjust  power  of  money,  which 
robs  the  producing  classes  of  their  rights.  As  the  boun- 
ties of  God  are  abundant,  so  must  the  money  for  their 
distribution  be  abundant,  or  they  can  never  be  justly 
distributed.  If  the  scarcity  of  money  or  its  centralizing 
power  retard  the  production  and  the  distribution  of  the 
products  of  labor,  the  power  of  the  money  is  unjust 
and  oppressive,  and  instead  of  being  in  unison  with 
the  providence  of  God,  it  is  the  most  powerful  opponent 
of  his  righteous  laws,  as  well  as  the  most  powerful  and 
bitter  opponent  of  justice  and  beneficence  among  men. 
It  would  be  as  reasonable  to  expect  sweet  waters  to  flow 
from  a  bitter  fountain,  as  to  expect  just  distributions  of 
property  if  the  standard  by  which  it  is  valued  is  unjust. 
We  are  not  depicting  an  unknown  evil.  Legislators, 
financiers  and  the  producing  classes  all  know  that  money 
is  possessed  of  some  mysterious  evil  power,  which  has 
never  been  clearly  explained  and  defined.  We  have  in- 
tended to  remove  this  mystery  concerning  the  nature  and 
operations  of  money,  and  to  show  what  laws  must  be  an- 
nulled, and  we  shall  proceed  to  show  what  other  laws 
must  be  enacted,  in  order  to  establish  money  that  will  be 
endowed  with  an  equitable  power.  The  evil  power  of 
money  has  been  politically  established,  and  it  must  be 
politically  annulled.  It  is  a  public  wrong,  and  the  public 
must  administer  the  remedy. 

it  contributes  in  no  slight  degree,  to  the  most  ennobling  exercise  of 
the  moral  and  mental  capabilities. 


THE  TJ8UBY  LAWS.  249 

SECTION    VI. 

REMARKS    ON   THE   REPEAL    OP   THE   USURY  LAWS. 

In  the  course  of  the  few  past  years,  numerous  petitions 
have  been  presented  to  the  legislature  of  the  State  of 
New  York,  praying  for  the  repeal  of  the  Usury  Laws. 
It  is  proposed  that  in  loaning  money  the  rate  of  interest 
should  be  agreed  upon  between  borrowers  and  lenders, 
as  the  piices  of  merchandise  are  agreed  upon  between 
buyers  and  sellers.  The  position  assumed  by  those  in 
favor  of  abolishing  the  Usury  Laws  is,  that  the  competi- 
tion between  the  lenders  of  money  would  be  so  great  as 
to  reduce  the  rate  of  interest  below  seven  per  cent.  But 
such  would  not  be  the  result.  There  is  now  no  law 
against  competition  at,  or  below,  seven  per  cent. ;  there- 
fore the  competition  at  seven  per  cent,  and  under  this 
rate,  could  not  be  increased  by  annulling  the  restriction. 

Another  argument  for  the  abolition  of  a  legal  rate  of 
interest  is,  that  the  laws  against  usury  are  continually 
violated.  In  large  cities,  money  is  often  loaned  at  from 
one  to  three  per  cent,  a  month,  at  a  quarter  and  a  half 
per  cent,  a  day,  and  sometimes  even  at  one  or  two  per 
cent,  a  day,  and  the  legal  rate  of  seven  per  cent,  per 
annum  does  not  govern  the  money-market ;  it  is,  there- 
fore argued  that  the  law  must  be  wrong ;  and  that  if  the 
price  to  be  paid  for  the  use  of  money  were  left  open  to 
competition,  the  demand  and  supply  would  equitably 
regulate  the  rate  of  interest. 

The  idea  commonly  held  out  is,  that  the  rates  of  in- 
terest would  be  lower  if  the  Usury  Laws  were  abolished ; 
and  anticipating  this  result,  many  are  induced  to  sign  the 
petitions.  There  is  reason  to  believe  that  the  principal 
originators  of  these  petitions  are  those  who  are  now  in- 
11* 


250  THE   USURY  LAWS. 

fringing  the  laws  by  exacting  extra  rates  of  interest,  and 
who  would  like  to  have  their  extortions  legalised.  They 
do  not  advocate  the  chartering  of  banks  without  restric- 
tions upon  their  rates  of  interest.  Banks  should  lend 
money  at  the  legal  rates.  Then  a  few  capitalists  would 
borrow  large  sums  from  them,  and  discounts  would  be 
refused  to  business  men,  who  would  be  compelled  to 
borrow  money  from  these  capitalists  at  the  rates  of  inter, 
est  for  which  they  would  agree  to  lend  it.  The  necessity 
of  the  borrower,  and  the  avarice  of  the  lender,  would 
fix  the  rate  of  interest.  If  a  capitalist  could  borrow 
from  a  bank  $10,000  for  ninety  days,  at  six  per  cent, 
per  annum,  and  reloan  it  at  three  per  cent,  a  month  to  a 
man  who  must  have  the  money  or  break,  he  would  make 
by  the  operation  a  clear  gain  of  $750.  Annul  the  laws 
against  usury,  and  this  kind  of  business  would  be  far  more 
extensive  than  it  now  is ;  but  under  the  existing  laws, 
more  of  it  is  done  than  is  for  the  benefit  of  the  public. 

Other  arguments  advanced  in  favor  of  abolishing  the 
TJmiry  Laws,  are  such  as  these.  It  is  said  when  goods 
are  sold  on  a  credit,  a  greater  difference  is  made  in  their 
price  than  the  interest  at  seven  per  cent,  per  annum  for 
the  time  of  the  credit,  and  it  is  therefore  right  that 
lenders  should  receive  higher  rates  of  interest  for  their 
money.  People  are  not  aware  that  the  high  and  fluctu- 
ating rates  of  interest  on  money  are  the  cause  of  the 
extra  prices  charged  for  credits  on  sales  of  goods.  Sup- 
pose a  merchant  is  obliged  to  turn  his  goods  into  money 
to  pay  a  debt.  He  sells  them  on  six  months'  credit, 
taking  the  purchaser's  note,  on  which  he  pays  two  and  a 
half  per  cent,  a  month  discount  to  obtain  the  cash.  He 
could  as  well  afford  to  take  fifteen  per  cent,  from  the 
goods  as  fifteen  per  cent  from  the  note.  The  purchaser 
of  the  goods  who  cannot  pay  the  money  even  when 
offered  this  large  discount  off  his  note,  is  not  as  safe  for 
the  payment  of  his  note  as  he  would  be  if  others  could 


THE   USURY   LAWS.  251 

not  get  so  large  a  discount  by  paying  cash.  It  gives  a 
man  who  can  pay  the  money  great  advantage,  over  one 
who  cannot,  for  if  the  latter  pay  fifteen  per  cent,  on  the 
cost  of  his  goods  for  six  months'  possession,  the  buyer 
for  cash  can  undersell  him.  If  money  could  be  always 
easily  borrowed  at  a  uniform  and  low  rate  of  interest, 
the  difference  between  sales  for  cash  and  credit  would 
vary  but  little  from  the  rate  of  interest ;  for  if  interest 
were  at  a  just  rate,  there  would  be  few  bad  debts,  and  a 
very  small  per  centage  on  goods  would  guard  against  all 
losses  from  this  cause. 

Another  proposition  is,  that  the  Usury  Laws  should  be 
taken  off  from  all  four  months'  paper,  and  the  rates  of  in- 
terest on  longer  loans  restricted,  as  if  four  months'  paper 
were  governed  by  different  principles  from  that  having 
six  or  eight  months  to  run.  It  would  be  hard  to  show 
how  selling  four  months'  notes  at  exorbitant  rates  of  in- 
terest would  save  the  credit  and  property  of  business 
men.  If,  at  the  end  of  the  first  four  months,  the  mer- 
chant be  obliged  to  sell  a  second  four  months'  note  at 
the  same  rate,  is  he  any  better  off  than  if  he  had  at  first 
sold  one  of  eight  months,  instead  of  the  two  four  months' 
notes  ?  If  it  were  legal  to  demand  as  high  rates  of  in- 
terest as  could  be  obtained  on  paper  not  having  more 
than  four  months  to  run,  paper  for  longer  dates  would  be 
unsalable  whenever  interest  on  the  short  paper  was  high. 
Usurers  now  say  that  they  take  a  higher  rate  of  interest 
on  account  of  the  risk  they  incur  by  lending  at  a  rate  not 
allowed  by  law.  Hence,  if  they  could  legally  demand 
two,  three,  or  four  per  cent,  a  month  discount  on  four 
months'  paper,  they  would  ask  still  higher  rates  for  dis- 
counting six  months'  paper,  to  pay  for  the  hazard  of  the 
illegal  act.  Besides,  if  any  rate  of  interest  which  people 
would  agree  to  pay  for  money  for  four  months  were  made 
legal,  whenever  the  rate  of  interest  was  high  those  who 
owed  money  on  bond  and  mortgage  would  probably  be 


252  THE   USURY   LAWS. 

called  upon  for  payment.  If  they  could  not  pay,  the 
holders  of  the  mortgages  would  give  them  four  months' 
time,  and  take  a  new  bond,  very  likely  at  two  or  three 
per  cent,  interest  a  month.  In  the  city  of  New  York 
there  is  probably  a  larger  amount  loaned  on  bond  and 
mortgage,  that  is  now  due,  than  the  amount  of  all  the 
capitals  of  banks  in  the  city.  Nearly  all  our  Insurance 
Companies  loan  their  money  thus  on  one  year's  time,  but 
do  not  expect  to  call  for  it  so  long  as  the  interest  is  re- 
gularly paid,  unless  they  meet  with  great  losses.  A  large 
proportion  of  these  mortgages  is  due.  Many  millions  are 
loaned  by  individuals  and  executors  of  estates,  and  per- 
haps a  very  large  proportion  of  these  would  be  called  for, 
in  order  to  obtain  the  higher  rates  of  interest.  The 
people  would  be  obliged  to  pay  almost  any  rates  that 
the  owners  of  the  mortgages  chose  to  exact ;  otherwise 
their  property  would  be  sold  to  satisfy  the  debts.  Either 
course  would  break  up  a  large  proportion  of  the  debtors, 
and  their  property  would  pass  over  to  their  creditors  for 
half,  or  less  than  half,  its  valne. 

Another  proposed  modification  of  the  law  is,  that  if 
the  money-lender  obtain  from  the  borrower  an  agree- 
ment to  pay  more  than  seven  per  cent,  interest  per 
annum,  and  prosecute  his  claim  for  the  recovery  of  the 
debt,  he  shall  be  allowed  to  collect  no  more  than  the  sum 
loaned  and  seven  per  cent,  interest.  Could  any  honest 
man  propose  a  law  for  the  prevention  of  theft,  the  only 
penalty  of  which,  in  case  of  detection,  should  be  the 
restoration  of  the  goods  ? 

If  the  people  desire  a  more  rapid  centralization  of 
wealth  and  power,  and  to  increase  the  depression  and 
poverty  of  the  producers,  let  them  annul  all  Usury  Laws, 
and  they  will  be  sure  of  success.  But  if  they  wish  to 
perpetuate  a  democratic  government,  and  elevate  the 
producing  classes,  they  must  reduce  the  present  power 
of  money,  or  it  will  surely  make  this  nation  a  practical 


THE   USURY   LAWS.  253 

aristocracy,  even  though  we  professedly  continue  to  be  a 
democracy.  A  righteous  government  must  rule  over 
money,  instead  of  allowing  the  money  to  over-rule  the 
government.  To  do  this,  it  must  furnish  a  sufficient 
supply  of  money,  and  regulate  a  right  rate  per  cent- 
interest.* 

*  See  Appendix,  G. 


CHAPTER  V. 

THE  AMOUNT  OF  A  CURRENCY  SHOULD  BE  LIMITED 
ONLY  BY  THE  WANTS  OF  BUSINESS.  • 

IT  is  indispensable  to  the  regulation  of  the  currency 
that  the  amount  of  money  should  be  limited  only  by  the 
wants  of  business.  It  has  been  already  shown  that  the 
value  of  money  is  determined  by  its  income,  or  rate  of 
interest.  This  proposition  being  established,  it  follows, 
that  if  the  interest  be  regularly  maintained,  the  amount 
of  money  may  be  unrestricted  without  decreasing  its 
value. 

The  following  illustration  will  show,  that  no  laws 
against  usury  can  prevent  the  oppression  and  evil  conse- 
quent upon  a  limited  amount  of  money. 

Suppose  one  hundred  thousand  persons  forming  a 
nation  to  frame  their  own  government  and  laws.  They 
make  gold  and  silver  coins  the  legal  currency,  and  fix 
the  rate  of  interest  at  six  per  cent.  Severe  penalties  are 
affixed  to  the  exaction  of  a  higher  rate,  and  to  the 
exportation  of  money  from  the  country.  This  nation 
has  in  coin  $12  to  each  inhabitant;  probably  as  much  as 
any  people,  however  wealthy,  can  keep  in  active  circula- 
lation.  The  specie  in  the  nation  amounts  to  $1,200,000. 
Twenty  men  become  worth  $100,000  each,  together 
$2,000,000.  One  million  is  loaned  on  bond  and  mort- 
gage and  business  notes  at  the  legal  rate.  When  all 
the  money  of  the  nation  is  in  active  use,  the  twenty  men 
determine  to  call  in  thirty  per  cent,  of  their  loans,  and 
hold  the  money  for  a  week  or  a  month  in  order  to  make 


THE   AMOUNT   OF   A   CUKSENCT.  255 

a  more  profitable  reinvestment.  This  takes  out  of 
circulation  $300,000,  one-fourth  of  the  whole  circulating 
medium,  and  causes  a  great  scarcity  of  money.  One- 
fourth  of  the  debts  in  the  nation  lie  over  unpaid,  for  all 
the  money  was  before  required  to  meet  contracts.  The 
twenty  men  hold  only  their  own  money,  and  no  law 
can,  or  should  compel  them  to  use  it.  They  do  not  take 
more  than  the  legal  rate  of  interest.  Let  these  men 
hold  their  money  for  six  months,  until  the  unpaid  debts 
are  mostly  collected  by  suits  at  law,  and  the  twenty  men 
and  other  owners  of  money  can  buy  the  property  of 
debtors  at  less  than  half  its  value.  All  securities  depre- 
ciate, and  confidence  is  lost  in  the  value  of  property,  and 
in  the  ability  of  debtors  to  discharge  their  obligations. 
Yet  no  money  leaves  the  country,  nor  is  any  change 
made  in  the  rate  of  interest. 

Twelve  hundred  thousand  dollars  is  an  abundance  of 
money  for  a  population  of  a  hundred  thousand  persons. 
If  we  allow  it  to  pass  from  one  individual  to  another 
three  times  a  week,  (and  money  passes  much  oftener  in 
cities,)  the  $1,200,000  would  pay  $3,600,000  of  debts 
every  week,  and  in  a  year  $187,200,000.  Notwithstand- 
ing this  abundance,  these  few  individuals  can  easily  affect 
the  money  market,  and  greatly  increase  their  wealth  by 
purchasing  property  at  reduced  rates,  and  selling  it  when 
the  depression  ceases.  If  the  amount  of  money  for  each 
inhabitant  were  increased  to  $20,  the  aggregate  amount 
would  be  but  $2,000,000,  and  the  twenty  men  would  be 
worth  as  much  as  the  whole  currency  of  the  nation,  and 
could  easily  keep  enough  in  their  own  possession  to  effect 
the  same  results.  The  government  is  powerless  to  pre- 
vent these  evils,  for  the  amount  of  money  is  limited,  and 
a  few  individuals  have  the  control  of  it. 

In  the  United  States  within  a  few  years,  in  times  of 
scarcity  of  money,  cows  were  sold  at  sheriff's  sale  at 
from  $2  to  $5  ;  good  horses  at  from  $3  to  $10  ;  and  cul- 


256  THE  AMOUNT   OF  A  CURRENCY 

tivated  lands  for  a  few  cents  an  acre,  when  they  cost 
their  owners  nearly  as  many  dollars.  When  money  be- 
came plenty  again,  these  cows,  horses,  and  lands  rose  to 
perhaps  quite  their  former  price.  No  nation  should  fix 
upon  a  standard  of  value  of  limited  amount.  For  a 
limited  amount  of  money,  even  at  a  uniform  interest,  will 
enable  the  owners  of  money  to  monopolize  the  property 
of  the  nation. 

The  State  of  New  York  has  a  population  of  3,500,000. 
Multiply  this  by  12,  and  we  have  $42,000,000,  a  much 
larger  sum,  doubtless,  than  is  kept  in  active  circulation  in 
our  State.  Still,  there  are  probably  two  men  in  the 
State  who  are  worth  more  than  this  sum ;  and  who  can, 
whenever  they  choose,  affect  not  only  the  money  market 
of  this  State,  but  also  that  of  every  State  in  the  Union. 
Neither  the  State  government,  nor  the  General  Govern- 
ment has  power  to  prevent  it,  nor  to  relieve  the  people. 

A  comparatively  small  sum  of  money  must  pay  all  the 
debts  now  existing  in  the  country.  It  must  also  pay  for 
the  year's  crops.  When  the  crops  arrive  in  market  they 
are  no  more  money  than  while  they  were  in  the  hands  of 
the  farmers,  and  if  they  will  not  sell  for  money  the  debts 
cannot  be  paid  with  them.  Neither  labor  nor  the  products 
of  labor  are  any  salvation  from  a  money  crisis.  A  power 
is  given  to  money  that  is  totally  different  from  all  other 
powers,  and  this  does  not  seem  to  be  at  all  understood. 
There  is  not  a  particle  more  natural  power  in  the  gold, 
silver  and  paper  out  of  which  money  is  made,  than  there 
is  in  iron,  tin  and  wood.  Consequently  the  power  of 
money  is  not  in  its  material  substance,  but  in  its  imma- 
terial legal  authority,  which  constitutes  both  its  power 
and  market  value.  The  material  part  of  the  money 
only  represents  the  immaterial,  and  this  immaterial 
power  is  exerted  to  an  enormous  extent  where  there 
is  nothing  in  the  shape  of  money  to  represent  it. 
Hence  this  power  is  wofully  oppressive ;  it  calls  for  a 


THE   AMOUNT   OF   A   CIJBRENCY.  257 

material  substance,  and  there  is  no  material  substance 
in  existence  to  meet  its  demands ;  and  the  labor  and 
property  must  be  diminished  in  their  market  value  so  as 
to  conform  to  the  material  quantity  of  the  money. 
Money  has  legal  authority  to  crush  the  value  of  labor  and 
property,  but  property  and  labor  have  not  a  particle  of 
legal  authority  over  money. 

When  a  national  government  has  established  money 
as  a  standard  of  value,  so  far  as  the  jurisdiction  of  the 
laws  extend,  the  money  is  clothed  with  an  omnipresent 
power,  such  as  no  other  earthly  thing  possesses.  This  om- 
nipresent power  of  money  is  used  a  hundred  times  more  in 
the  entire  absence  of  its  material  substance  than  it  is 
when  and  where  the  material  substance  is  present. 
Manufacturing  companies,  in  this  country,  mostly  send 
their  goods  to  commission  merchants  in  the  city.  These 
goods  are  credited  to  the  manufacturers,  who  draw  upon 
the  merchants  at  such  dates  and  times,  and  for  such 
amounts  as  are  agreed  upon  between  the  parties.  These 
goods  are  sold  on  four,  six,  eight  and  ten  months' 
credit  to  jobbers  in  the  city,  who  sell  them  again  to 
merchants  in  the  country,  upon  perhaps  equally  long 
credits.  All  these  sales  are  founded  upon  money,  and 
yet  all  these  agreements  are  made  without  any  use 
of  the  material  substance  of  the  money.  The  material 
substance  is  not  necessary  in  making  these  sales.  In 
running  accounts  at  stores,  the  goods  are  extended, 
summed  up,  and  the  amount  is  a  balance  against  the 
debtor  of  so  much  money :  but  not  the  labor  of  the 
debtor  nor  any  product  of  labor  has  legal  authority 
to  pay  this  balance.  There  is  a  certain  amount  of  money 
due,  which  the  creditor  can  force  the  debtor  to  pay,  no 
matter  how  much  the  latter  may  have  to  sacrifice,  of  his 
labor  or  products  in  market  in  order  to  exchange  them 
for  money.  Yet  in  incurring  the  indebtedness,  not  a 
penny  of  the  material  substance  of  money  may  have  been 


258  THE  AMOUNT   OF  A   CDERENCY 

used.  It  is  simply  the  legal  authority  and  power  of 
money  which  are  used  in  making  all  these  obligations 
and  agreements ;  but  in  order  to  pay  these  debts  money 
must  be  had  in  its  material  form. 

It  is  obvious  that  ah1  agreements  for  the  sale  of  pro- 
perty and  labor  are  founded  upon  money,  and  that  no 
price  could  be  fixed  upon  any  property  or  labor  without 
first  having  a  standard  of  value.  When  this  standard  is 
established,  it  is  not  a  matter  of  choice  but  of  necessity 
that  the  people  use  it  in  all  business  transactions.  If 
individuals  barter  one  kind  of  property  for  another,  they 
fix  a  price  for  each  kind  of  property,  and  they  must  use 
the  power  of  money  in  order  to  estimate  the  value,  so 
that  even  in  a  barter,  where  not  a  dollar  of  the  material 
substance  of  money  is  present,  its  power  is  used  ;  and  the 
balance  may  be  adjusted  by  the  addition  of  more  pro- 
perty on  one  side  or  the  substitution  of  less  on  the  other ; 
but  if  a  balance  be  left  unsettled,  the  creditor  can  compel 
the  debtor  to  pay  it  in  money. 

Again,  the  banks  in  the  city  of  New  York  publish 
weekly  statements  of  the  amount  under  discount,  the 
amount  of  specie  on  hand,  of  money  on  deposit,  and  of 
bank-notes  in  circulation.  These  weekly  statements  are 
given  under  oath  of  the  officers  of  the  banks,  and 
the  people  suppose  there  is  actually  so  much  money 
deposited  in  the  banks  belonging  to  depositors.  Now, 
are  these  deposits  all  money  ?  If  they  are,  the  power  of 
money  is  not  in  its  material  substance,  for  all  the  specie 
and  all  the  bank-notes  held  by  the  banks  would  not,  in 
ordinary  times,  pay  even  one-half  of  these  deposits  as 
reported.  Then  in  what  does  the  other  half  consist? 
It  consists  in  a  mere  balance  of  accounts ;  and  if  these 
balances  are  money,  it  follows  that  the  power  of  money  is 
not  in  its  material  substance.  But  this  power  has  the 
ability  to  call  for  the  material  substance  to  satisfy  its  re- 
quirements. Let  the  banks  in  the  city  of  New  York 


THE   AMOUNT   OF   A   CUKEENCY.  259 

curtail  their  discounts,  so  that  they  shall  not  exceed  the 
actual  amount  of  their  specie  and  the  bank-notes  which 
they  have  received  from  the  Comptroller,  and  it  would 
paralyze  the  business  of  the  nation,  and  make  a  far  more 
ruinous  crisis  than  that  of  1837,  or  the  one  of  1857.  The 
property  and  labor  of  the  country  would  sink  into  insig- 
nificance before  this  overwhelming  power  of  money.  The 
usurers  would  get  almost  any  price  they  chose  to  charge 
for  the  use  of  money,  and  thus  monopolize  the  great 
wealth  of  the  nation  without  even  lifting  their  hands 
in  any  productive  labor.  Under  our  present  mone- 
tary laws  the  people  would  be  compelled  to  submit  to 
these  extortions  ;  for  the  money  has  the  legal  power,  but 
property  and  labor  have  no  legal  authority  over  the 
money.  The  holder  of  a  mortgage  for  $1,000  on  pro- 
perty worth  $50,00f ,  if  the  mortgagor  could  not  pay  the 
money,  might  buyfin  the  property  worth  $50,000  for 
even  $100,  and  entp  up  a  judgment  against  his  debtor 
for  $900.  A  debtor  placed  in^these  circumstances  would 
doubtless  try  his  best  to  borrow  the  $1,000,  even  if  he 
had  to  pay  one  or  two  per  cent,  a  day,  in  order  to  pre- 
vent this  great  sacrifice  of  his  property,  and  in  the  hope 
that  there  would  be  more  ease  in  the  money  market. 
This  endowment  of  money  with  an  immaterial,  omnipre- 
sent power,  which  can  be,  and  is,  used  to  any  extent 
without  the  presence  of  the  material  substance,  and  this 
immaterial  power  having  the  legal  right  to  call  for  money 
in  its  material  form  to  fulfil  its  requirements  and  satisfy- 
its  demands,  when  the  government  has  neglected  to  pro- 
vide the  necessary  material  substance,  is  a  gross  outrage 
upon  the  rights  of  the  people. 

A  certain  amount  of  money  is  required  to  fulfil  the 
business  engagements  of  a  nation.  If  one-fourth  of  that 
amount  be  withheld  from  circulation,  one-fourth  of  the 
contracts  must  remain  unpaid.  A  high  price  charged 
for  the  remaining  three-fourths,  will  not  enable  them  to 


260  THE   AMOUNT   OF  A   CURRENCY. 

supply  the  place  of  the  absent  one-fourth,  which  is  indis- 
pensable to  the  prosperity  of  business.  No  country  can 
be  prosperous,  while  capitalists  can  cause  a  scarcity  of 
money.  Their  legal  right  to  withdraw  their  money  from 
circulation  cannot  be  denied  ;  but  the  exercise  of  this 
right  should  not  operate  to  the  injury  of  others.  Some 
public  means  must  be  devised  whereby  the  requisite 
amount  of  money  for  the  people  may  always  be  supplied, 
at  the  legal  rate  of  interest.  No  government  should  make 
a  currency  of  a  material  of  which  it  cannot  supply  a 
quantity  adequate  to  the  wants  of  the  people,  for  it  can- 
not be  necessary  to  have  a  representative  of  value  scarce 
so  long  as  there  is  an  abundance  of  actual  value  suscepti- 
ble of  representation.  It  will  be  hereafter  shown,  that 
in  all  sections  of  the  country,  a  certain  part  of  the  actual 
value  of  the  property  may  be  so  represented  by  money 
as  to  supply  an  abundant,  uniform  and  good  currency, 
and  that  a  rate  of  interest  may  be  adopted  and  main- 
tained, which  will  reward  labor,  and  promote  the  public 
welfare. 


CHAPTER    VI. 

THE    NECESSITY   OF    CREDIT. 

To  credit  is  to  trust  our  property,  or  the  reward  for 
our  labor,  in  the  hands  of  others  for  a  limited  time. 
Governments  could  not  exist,  nor  legislative  bodies  meet, 
without  credit.  The  members  of  Congress  trust  the 
Government  to  pay  their  travelling  expenses,  and  the 
nation  trusts  the  Government  with  funds  for  that  pur- 
pose. We  continually  trust  our  fellow-men.  The 
laborer  who  works  by  the  day  trusts  his  employer  until 
evening  for  his  wages.  If  the  employer  pay  in  advance, 
he  trusts  the  laborer.  Daily  laborers  are  supposed  to 
incur  little  risk  by  trusting  their  employers,  but  in  the 
city  of  New  York  they  have  lost  large  amounts  in  this 
way.  The  clergyman  trusts  his  parish  for  his  salary ; 
the  teacher  the  parents  of  the  children ;  colleges  their 
students,  etc.,  etc.  Houses  could  not  be  rented  without 
credit ;  the  owner  credits  the  tenant  with  the  use  of  his 
property  ;  the  tenant  may  injure  or  destroy  it.  If  it  be 
insured,  he  trusts  the  insurance  company  to  indemnify 
him  for  loss  by  fire.  If  the  tenant  pay  rent  in  advance, 
the  house  may  be  burned,  and  he  may  lose  his  money. 
Banks  could  not  exist  without  credit.  The  people  credit 
the  banks  on  their  bank-notes,  and  the  banks  credit  the 
people  on  their  indorsed  notes.  The  people,  too,  trust 
the  banks  with  deposits.  A  very  large  proportion,  at 
least  ninety  or  ninety-five  per  cent,  of  the  exchanges  of 
productions,  is  made  on  a  longer  or  shorter  credit.  All 
merchandise  sent  by  manufacturers  to  commission  mer- 


262  THE   NECESSITY   OF   CREDIT. 

chants  in  our  cities,  is  trusted  in  the  hands  of  the  latter. 
A  very  large  proportion  of  this  merchandise  is  sold  on  a 
credit  of  six  or  eight  months  to  jobbers,  and  is  then 
resold  by  them  to  retailers  on  credit,  who  again  sell  to 
consumers  mostly  on  credit.  Nearly  all  our  internal  im- 
provements are  contracted  for  on  a  certain  time  of  credit. 
A  considerable  proportion  of  these  contracts  is  paid 
for  by  borrowing  money  on  mortgage  of  the  improve- 
ments. Even  goods  sold  for  cash  are  usually  delivered 
before  payment.  Except  on  an  exceedingly  limited  scale, 
exchanges  of  productions  could  not  be  made  without 
credit.  Neither  the  General  Government  nor  the  State 
governments  could  raise  money  at  home  or  abroad  with- 
out it.  Our  country  could  never  have  achieved  its  inde- 
pendence without  the  money  it  obtained  upon  credit. 


CHAPTER  VH. 

A  WELL-REGULATED  CURRENCY  IMPOSSIBLE 
UNDER  PRESENT  LAWS. 

OUR  whole  banking  system  is  based  upon  a  credit 
given  by  law  to  bank-notes,  for  which  the  people  furnish 
the  security  in  their  indorsed  notes  and  State  bonds.  For 
the  legal  representative  has  no  value  in  itself;  it  rests 
upon  actual  capital,  the  earth  and  its  productions,  and 
not  upon  the  inherent  value  of  its  material.  It  may  then 
be  asked,  why  the  State  governments  cannot  bank  on  the 
same  security,  and  appropriate  the  gains  to  the  public 
benefit,  instead  of  allowing  a  few  individuals  to  acquire 
large  fortunes  by  private  banking.  But  bank-notes  issued 
by  a  State  would  soon  depreciate.  The  currency  must 
be  national,  and  pass  equally  well  in  all  sections  of  the 
country.  If  a  State  should  make  paper  money  a  tender 
(and  this  is  forbidden  by  the  Constitution),  the  money, 
like  the  money  of  the  banks  chartered  by  the  States,  must 
necessarily  be  redeemed  with  specie  to  secure  public 
confidence.  But  this  local  redemption  would  make  the 
money  of  unequal  value  in  different  sections  of  the  Union. 
Another  difficulty  would  be  incurred  by  a  State  bank, 
that  unless  a  few  of  the  largest  capitalists  were  included 
as  stockholders,  and  the  interest  of  the  wealthiest  men 
identified  with  the  bank,  it  would  soon  be  compelled  to 
suspend  payments. 

A  United  States  Bank  could  not  regulate  the  currency. 
Before  the  General  Government  could  establish  the  insti- 
tution, it  would  be  obliged  to  consult  a  feAV  large  capi- 


264:  A   GOOD   CUKKENCY   IMPOSSIBLE 

talists  to  ascertain  whether  they  would  take  the  stock. 
If  the  charter  were  not  one  which  would  probably  secure 
an  income  quite  as  good  as  any  other  investment,  they 
would  refuse  the  stock,  and  the  Government  could  not 
establish  the  bank.  If  the  Government  should  deem 
three  per  cent,  a  just  rate  of  interest,  and  should  limit 
the  dividends  at  this  rate,  the  stock  would  not  be  taken. 
But  should  it  allow  six  per  cent,  interest,  and  leave 
the  dividends  unlimited,  both  native  and  European  capi- 
talists would  call  it  a  good  investment  for  money,  if  they 
could  retain  sufficient  control  of  the  institution. 

If  under  our  present  laws  making  all  notes  redeemable 
in  specie,  the  General  Government  should  establish  a 
bank,  and  issue  enough  paper-money  for  all  business 
transactions,  at  a  low  rate  of  interest,  our  large  capitalists 
would  array  themselves  against  it  by  collecting  their 
debts  in  bank-notes,  and  demanding  specie  from  the  bank. 
Such  a  bank,  established  on  a  specie  basis,  could  not  be 
sustained  a  month.  The  Government  and  all  the  produ- 
cers could  not  prevent  its  total  failure. 

Monetary  laws  are  the  most  important  subjects  for 
legislation.  It  is  the  duty  of  every  national  government 
to  institute  and  regulate  the  medium  of  exchange ;  but 
that  this  duty  has  been  imperfectly  discharged,  appears 
from  the  fact  that  where  specie  is  made  the  only  tender 
in  payment  of  debts,  neither  the  government  nor  the 
mass  of  the  people  have  had  or  can  have,  any  adequate 
control  over  it.  Capitalists  control  the  money,  and 
through  the  money  control  the  Government.  The  defect 
of  the  present  monetary  laws,  further  appears  from  the 
variations  in  the  rates  of  interest  on  Government  stocks, 
perfectly  secured  at  all  times,  but  constantly  fluctuating 
in  value.  If  the  Government  does  not  secure  a  uniform 
value  to  money  for  its  own  use,  how  can  it  be  said  to 
regulate  the  currency  of  the  country. 

It  is  impossible  to  secure  to  labor  its  earnings,  under 


UNDER   PRESENT   LAWS.  265 

systems  by  which  the  Government  and  the  people  depend 
upon  a  few  capitalists  to  furnish  the  medium  and  stand- 
ard for  the  distribution  of  the  productions  of  labor.  In 
the  plan  about  to  be  developed,  the  whole  people,  through 
Congress,  would  hold  the  power,  and  fix  the  rate  of 
interest.  They  can  by  a  vote  put  the  system  in  suc- 
cessful operation  without  consulting  capitalists,  banks  or 
brokers. 


12 


266  RECAPITULATION. 


RECAPITULATION. 

IN  the  foregoing  chapters  the  following  propositions 
have  been  considered,  and,  it  is  believed,  fully  sustained. 

1.  That  there  is  an  essential  difference  between  intrin- 
sic value  and  the  value  of  money. 

2.  That  any  material  may  be  made  money,  by  endow- 
ing it   with   the   following   legal  powers,   namely,   the 
powers  to  represent  value,  to  measure  value,  to  accumu- 
late value  by  interest,  and  to  exchange  value. 

3.  That    money  which   does    not  represent    its    full 
amount  of  actual  value,  carries  upon  its  face  a  false  pre- 
tence ;    nothing  can  in   fact  be   money,   that  does   not 
represent  property. 

4.  That  money,  as  a  measure  of  value,  is  controlled  by 
the  rate  per  cent,  interest  that  it  bears. 

5.  That  the  necessary  effects  of  the  present  rates  of 
interest,  are  to  accumulate  property  in  large  cities,  and 
in  the  hands  of  a  few  capitalists. 

6.  That  the  present  rates  of  interest  greatly  exceed 
the  increase  of  wealth  by  natural  production,  and  conse- 
quently, call  for  production  beyond  the  ability  of  produ- 
cers to  supply. 

7.  That  the  rate  per   cent,  interest  determines  what 
proportion  of  products  shall  be  awarded  to  capital,  and 
what  to  labor. 

8.  That  in  proportion  as  the  rate  per  cent,  on  mo»ey 
is  increased,  the  value  of  property  and  labor  is  decreased. 

9.  That  a  currency  constantly  fluctuating  in  value,  by 
varying  rates  of  interest,  is  no  more  suitable  as  a  medium 
of  exchange  than  an  elastic  yard-stick  is  fit  for  a  measure 
of  cloth  ;  that  justice  requires  uniformity  of  value,  and 
that  our  present  currency  is  devoid  of  this  quality. 

10.  That  our  present  banking  system  rests  upon  a  fic- 
titious basis,  is  unsafe,  and  is  productive  of  many  and 


RECAPITULATION.  267 

great  injuries ;  and  while  it  calls  upon  producers  for  a 
large  sum  of  money  to  pay  for  the  use  of  its  bank-notes, 
at  the  legal  rate  of  interest,  it  assists  capitalists,  brokers, 
etc.,  in  monopolizing  money,  and  enables  them  to  extort 
large  sums  from  merchants,  mechanics  and  other,  beyond 
the  legal  rate. 

11.  That  the  currency,  to  be  of  uniform  value,  must 
be  limited  only  by  the  wants  of  business. 

12.  That  credit  is  indispensable. 


PART     II. 
A  TRUE   MONETARY   SYSTEM. 

CHAPTER    I. 

THE   SECURITY   OF   A   PAPER   CURRENCY. 

WE  now  enter  upon  the  most  important  and  yet  the 
simplest  part  of  this  subject ;  namely,  the  institution  of 
a  true  monetary  system,  by  which  the  distribution  of 
wealth  can  be  properly  regulated. 

It  has  been  proved  in  our  foregoing  arguments,  that 
the  amount  of  a  currency  should  be  equal  to  the  wants 
of  the  people,  and  that  gold  and  silver,  of  which  the 
quantity  is  necessai'ily  limited,  are  not  the  proper  mate- 
rials. It  remains  to  be  proved  that  a  paper  currency  can 
be  established,  which  shah1  be  always  adequate  in  amount, 
and  which  can  be  maintained  at  a  uniform  value.  The 
present  chapter  will  offer  some  considerations  of  the 
security  and  competence  of  a  paper  currency,  as  a  medium 
of  exchange. 

First,  we  may  notice  some  of  the  ways  in  which  paper 
is  now  used,  and  in  which  a  legal  power  expressed  upon 
it  is  deemed  sufficient  security.  All  titles  to  land,  all 
loans  of  money  on  bond  and  mortgage  or  otherwise,  the 
payments  for  all  lands,  and  for  every  other  species  of 


27"  A  TRUE  MONETARY   SYSTEM. 

property  on  a  credit,  are  secured  by  paper.  These  papers 
must,  of  course,  be  made  legal  liens  upon  property  or 
they  would  be  worthless,  for  their  value  must  consist  in 
their  control  of  real  property,  and  not  in  any  worth  in- 
herent in  their  substance.  Money,  of  every  description, 
gold,  silver  and  paper,  is  created  by  the  laws,  and  its 
value  consists  in  its  being  made  by  law  a  public  lien  upon 
all  property  for  sale. 

The  difference  between  a  private  obligation,  such  as  a 
mortgage,  or  note  of  an  individual,  and  money,  is,  that 
the  two  former  are  private  liens,  one  on  a  specific  piece 
of  property,  the  other  on  any  or  all  the  property  of  an  in- 
dividual ;  while  money  is  a  public  Hen  on  all  property  for 
sale,  whether  that  property  be  owned  by  individuals  or 
by  the  Government.  Between  individuals  and  the  Gov- 
ernment, the  law  secures  the  fulfilment  of  contracts  by 
mortgages  and  other  paper  instruments.  If  paper  in- 
struments can  be  made  safe  representatives  of  property 
between  two  individuals,  no  good  reason  appears  why 
paper  instruments  cannot  be  made  safe  representatives  of 
property  for  any  number  of  individuals.  If  paper 
instruments  can  be  made  representatives  of  property  for 
limited  periods  of  time,  no  good  reason  is  perceived  why 
they  cannot  be  made  safe  representatives  of  property 
when  made  payable  on  demand.  And  if  made  payable 
on  demand  in  something  capable  of  producing  an  imme- 
diate income,  they  are  then  made  competent  to  fulfil  all 
the  uses  of  money;  for  money  can  have  no  other  use  than 
to  exchange  for  property,  or  to  loan  for  an  income. 

Governments  have  falsely  assumed  that  the  value  of 
money  consists  in  the  inherent  worth  of  the  gold,  silver 
and  copper  materials  out  of  which  it  has  been  coined. 
This  is  not  only  palpably  a  false  assumption,  but  the  laws 
of  nations  prove  it  to  be  so  ;  for  in  nearly  every  civilized 
nation,  the  governments  have  authorized  paper  money 
(when  secured  by  State  and  National  stocks,  bonds  and 


SECURITY   OF    A   PAPEE   CUKRENCY.  271 

mortgages,  and  so  forth,)  to  be  issued  in  the  form  of  bank- 
notes and  to  circulate  as  money.  England  has  made 
paper  money  a  tender  in  payment  of  debts ;  and  in  other 
countries,  where  paper  in  the  form  of  bank-notes  is 
authorized  to  be  used  as  mon>ey,  although  it  is  not  a 
tender,  it  is  generally  received  as  such.  Bank-notes  are 
called  money,  although  the  laws  do  not  make  them  a  ten- 
der for  debts.  Banks  are,  however,  chartered  by  law,  and, 
therefore,  the  bank-notes  issued  by  them  are  generally 
considered  as  money,  and  answer  all  its  purposes.  They 
are  founded,  or  based  on  a  promise  to  pay  specie  on  de- 
mand. Let  us  see,  however,  if  they  are  not  practically 
money,  instead  of  being  merely  representatives  of  gold 
and  silver  coins.  A  man  exchanges  at  a  bank  in  New 
York  a  hundred  dollars  in  specie  for  a  one  hundred 
dollar  bank-note,  and  takes  it  to  the  westefn  country 
to  buy  land.  The  note  is  thus  put  in  circulation 
there,  is  loaned  and  reloaned  on  interest,  and  is  used  in 
the  purchase  of  property  and  products.  It  is  continually 
active,  while  the  silver  for  which  the  bank-note  was  taken 
in  lieu,  lies  dead  in  the  vault  of  the  bank,  and  is  neither  used 
to  purchase  property  or  products,  nor  to  fulfil  contracts, 
nor  to  produce  an  income.  The  bank-note  has  performed 
all,  while  the  specie  has  performed  none  of  the  functions 
of  money.  If  the  former  should  circulate  for  any  num- 
ber of  years,  and  should  be  loaned  for  an  income,  and 
used  to  purchase  property  thousands  of  times,  and  when 
it  was  returned  to  Xew  York,  there  should  be  no 
specie  in  the  vault  of  the  bank  to  redeem  it,  still,  every 
purchase  made  by  the  bank-note  would  be  valid,  and 
every  mortgage  for  which  it  had  been  received  would  be 
a  binding  lien  upon  the  property  of  its  drawer  for  the 
payment  of  specie  both  for  the  principal  and  the  interest. 
Coins  and  bank-notes  have  a  legal  power  to  accumulate, 
not  natural  to  either  of  them.  Both  are  generally  re- 
ceived in  tender  for  debts,  so  that  one  Is  practically  as 


272  A   TKUE   MONET AKY    SYSTEM. 

much  money  as  the  other.  In  fact,  if  either  is  to  be  de- 
spoiled of  its  character  as  money,  it  must  be  the  specie, 
for  this  is  mostly  deposited  in  the  vaults  of  the  banks,  and 
while  so  deposited  is  not  practically  money  ;  but  the  bank- 
notes which  perform  m^re  than  ninety-five  hundredths 
of  the  exchanges,  are  really  the  money  of  the  country, 
and  fulfil  all  its  uses  with  greater  convenience  and  celerity 
than  could  gold  and  silver.  Paper  made  to  represent 
landed  property  instead  of  specie,  and  endowed  with 
legal  power  to  accumulate,  measure,  and  exchange  pro- 
perty would  answer  every  purpose  of  money,  and  would 
be  money. 

The  abundance  of  paper  is  not  an  objection  to  its  use 
as  the  material  of  money,  more  than  to  its  use  for  deeds, 
notes,  bonds  and  mortgages.  It  would  be  a  better  mate- 
rial for  money  than  gold  and  silver,  for  these  metals  are 
limited  in  amount,  and  are  troublesome,  expensive,  and 
hazardous  to  remit.  If  a  sufficient  gold  and  silver  cur- 
rency were  presented  to  this  nation  free  of  cost,  the 
inconvenience  and  expense  attending  the  circulation  and 
transmission  of  the  coins,  would  far  overbalance  the 
whole  labor  and  expense  to  provide  and  circulate  a 
paper  currency. 

The  question  to  be  settled  then,  is  this ;  can  a  currency 
be  formed  entirely  of  paper,  which  will  buy  the  produc- 
tions of  labor  as  readily  as  gold  and  silver  coins — not 
whether  a  silver  spoon  can  be  made  out  of  a  paper  dollar, 
or  whether  a  gold  watch-case  can  be  made  out  of  a  ten 
dollar  bank  bill  as  well  as  it  could  be  out  of  an  eagle. 
We  do  not  want  money  to  make  utensils  and  ornaments. 
We  want  money  for  a  medium  of  exchange,  to  buy  such 
articles  as  are  useful  to  us,  and  if  it  cannot  be  made  of 
paper  so  that  it  will  be  as  good  to  the  man  who  sells  hi ; 
labor  or  his  products  as  gold  and  silver  coins,  we  must 
not  have  a  paper  currency. 


CHAPTER  H. 

THE  SAFETY  FUND. 

SECTION  I. 

THE   FORMATION   OF   MONEY,    AND   THE   MODE   OF   ISSUE. 

THE  Constitution  declares,  Art.  I.,  Sec.  VIII.,  5,  "That 
the  Congress  shall  have  the  power  to  coin  money,  regu- 
late the  value  thereof,  and  of  foreign  coin,  and  fix  the 
standard  of  weights  and  measures."  Sec.  X.,  I.,  "  No 
State  shall  coin  money,  emit  bills  of  credit,  make  any. 
thing  but  gold  and  silver  a  tender  in  payment  of  debts." 
It  is  clear  that  Congress  has  the  Constitutional  right  to 
coin  money,  and  regulate  its  value ;  to  emit  bills  of  credit, 
and  to  make  anything  it  chooses  a  tender  in  payment  of 
debts.  This  reserved  right  makes  it  the  duty  of  the 
General  Government  to  provide  the  money  of  the 
nation  ;  and  it  is,  accordingly,  bound  to  make  money  in 
quantities  adequate  to  the  wants  of  business,  and  to 
institute  it  in  a  way  which  will  secure  the  effectual  reg- 
ulation  of  its  value.  The  Constitution  as  plainly  calls 
for  the  exercise  of  the  Federal  power  for  this  purpose,  as 
for  the  fixing  of  the  standards  of  weights  and  measures. 
Sec.  X.,  I.,  declares  that  the  States  have  no  right  to  coin 
money,  emit  bills  of  credit,  or  make  anything  but  gold 
and  silver  a  tender  in  payment  of  debts.  Bank  bills 
are  bills  of  credit,  and  very  hazardous  ones  too ;  for  mill- 

12*  ST3 


274  A   TRUE   MONETARY    SYSTEM. 

ions  of  them  are  issued  without  being  representatives  of 
property,  and  many  holders  have  sustained  great  losses 
by  their  failure.  According  to  the  Constitution,  the 
State  governments  have  no  right  to  establish  banks,  and 
impose  this  hazard  and  loss  upon  the  people  ;  they  have 
infringed  the  province  of  the  General  Government. 
Having  themselves  no  Constitutional  right  to  issue  bills 
of  credit,  they  can  certainly  have  no  power  to  delegate 
such  right  to  others. 

In  the  plan  we  are  about  to  propose  for  the  formation 
of  a  National  Currency  by  the  General  Government,  all 
the  money  circulated  in  the  United  States  will  be  issued 
by  a  national  institution,  and  will  be  a  representative  of 
actual  property,  therefore  it  can  never  fail  to  be  a  good 
and  safe  tender  in  payment  of  debts.  It  will  be  loaned 
to  individuals  in  every  State,  county,  and  town,  at  a 
uniform  rate  of  interest,  and  hence  will  be  of  invariable 
value  throughout  the  Union.  All  persons  who  offer  good 
and  permanent  security  will  be  at  all  times  supplied  with 
money,  and  for  any  term  of  years  during  which  they  will 
regularly  pay  the  interest.  Therefore,  no  town,  county,  or 
State,  need  be  dependent  upon  any  other  for  money,  be- 
cause each  has  real  property  enough  to  secure  many 
times  the  amount  which  it  will  require.  If  more  than  the 
necessary  amount  of  money  be  issued,  the  surplus  will  be 
immediately  funded,  and  go  out  of  use  without  injury. 
It  will  be  impossible  for  foreign  nations,  or  any  number 
of  banks,  or  capitalists,  to  derange  the  monetary  system, 
either  by  changing  the  rate  of  interest,  or  by  inducing  a 
scarcity  or  a  surplus  of  money.  It  will  be  the  duty  of 
the  Government  to  ascertain  as  nearly  as  possible  what 
rate  of  interest  will  secure  to  labor  and  capital  their 
respective  rights,  and  to  fix  the  interest  at  that  rate. 

The  plan  requires  the  General  Government  to  establish 
an  institution,  with  one  or  more  branches  in  each  State. 
This  institution  may  appropriately  be  called  the  NATIONAL 


FORMATION   OF   THE   MONEY.  275 

SAFETY  FUND  :  first,  because  the  money  of  this  institu- 
tion will  constitute  a  legal  tender  of  uniform  value  for  the 
whole  people,  and  will  always  be  safe ;  second,  because 
the  interest  being  fixed  at  a  just  rate  it  will  secure  the 
respective  rights  of  labor  and  capital ;  and  third,  the 
supply  of  money  being  always  commensurate  with  the 
wants  of  business,  it  will  effectually  protect  the  nation 
from  financial  revulsions. 

To  make  this  currency  a  true  representative  of  prop- 
erty, the  Safety  Fund  must  issue  its  money  only  in  ex- 
change for  mortgages  secured  by  double  the  amount  of 
productive  landed  estate.  The  money  ought  not  to  be 
issued  on  perishable  property,  nor  on  the  credit  of  indi- 
viduals, because  such  property  might  be  destroyed,  or 
the  individuals  become  bankrupt,  when  the  money  would 
cease  to  be  a  representative  and  become  worthless, 
except  for  the  guarantee  of  the  Government,  and  the  loss 
would  fall  upon  the  nation.  The  money,  then,  when  put 
in  circulation,  will  represent  and  be  secured  by  the  first 
half  of  productive  property,  and  the  interest  upon  the  mort- 
gages will  be  secured  by  a  portion  of  the  yearly  products 
or  income  of  the  property.  The  Safety  Fund  will  issue 
its  money,  bearing  no  interest,  for  the  mortgages  bearing 
interest.  We  have  shown  that  money  to  maintain  its 
value  must  not  only  represent  property,  but  must  always 
be  capable  of  being  loaned  for  a  uniform  income.  It  is 
therefore  necessary  to  provide  not  only  for  the  issue,  but 
also  for  the  funding  of  the  money.  No  government  can 
regulate  the  value  of  money  unless  it  provide  means  for 
funding  'it ;  this  being  the  only  way  in  which  the 
interest  upon  it  can  be  kept  uniform. 

The  first  of  the  following  obligations  will  be  the  money 
of  the  institution  ;  the  second  will  be  a  note  bearing  in- 
terest for  the  funding  of  the  money : 


276  A   TRUE   MONETARY    SYSTEM. 

No. MONEY.  Dated 

$500.  1500. 

The  United  States  will  pay  to  the  bearer  Jive  hundred 
dollars  in  a  Safety  Fund  Note,  on  demand,  at  the  Safety 
Fund  Office  in  the  city  of 

No. SAFETY  FUND  NOTE.        Dated 

$500  $500 

One  year  from  the  first  day  of  May  next,  or  at  any 
time  thereafter,  the  United  States  witt  pay  to  A.  B.,  or 

order,  in   the  city  of five  hundred  dollars ; 

and,  until  such  payment  is  made,  witt  pay  interest  thereon 
on  the  first  day  of  May  in  each  year,  at  the  rate  of  one 
per  cent,  per  annum. 

The  money  will  bear  no  interest,  but  may  always  be 
exchanged  for  the  Safety  Fund  Notes,  which  will  bear 
interest.  Those  who  may  not  wish  to  purchase  property 
or  pay  debts  with  their  money,  can  always  loan  it  to  the 
Institution  for  a  Safety  Fund  Note,  bearing  an  interest 
of  one  per  cent,  per  annum.  Therefore  the  money  will 
always  be  good  ;  for  it  will  be  the  legal  tender  for  debts 
and  property,  and  can  always  be  invested  to  produce  an 
income. 

The  money  being  loaned  at  one  and  one-tenth  per  cent., 
and  the  Safety  Fund  Notes  bearing  but  one  per  cent.,  the 
difference  of  ten  per  cent,  in  the  interest  will  induce 
owners  of  money  to  lend  to  individuals,  and  thus  prevent 
continual  issuing  and  funding  of  money  by  the  Institu- 
tion. 

The  Safety  Fund  Notes  are  made  payable  %  year  after 
date,  to  prevent  the  unnecessary  trouble  of  funding  money 
for  short  periods.  It  is  not  probable  that  the  Institution 


FORMATION   OF   THE   MONEY.  277 

will  issue  Notes  for  a  less  amount  than  $500.  People 
having  small  amounts  will  seldom  wish  to  fund  them. 
They  Avill  loan  to  individuals  or  purchase  property.  If, 
however,  it  be  deemed  desirable  to  rand  small  amounts, 
they  may  be  received,  and  credited  in  a  small  book,  as 
in  savings  banks,  and  the  interest  paid  upon  these  credits 
as  upon  Safety  Fund  Notes. 

Having  given  an  outline  and  brief  explanation  of  the 
proposed  system  of  currency,  we  will  proceed  to  show 
that  the  money  issued  by  the  Safety  Fund  will  possess 
all  the  properties,  and  be  capable  of  performing  all  the 
functions  of  money.  We  have  said  in  our  description  of 
money  that  it  must  be  a  representative  of  property.  The 
Safety  Fund  money  being  based  on  productive  landed 
estate  to  double  its  amount,  will  be  an  undoubted  repre- 
sentative of  property.  Second,  money  must  have  power 
to  accumulate.  The  provision  made  by  the  Safety  Fund 
for  funding  the  money  will  secure  an  income  beyond  all 
contingency.  Third,  it  must  have  power  to  measure 
value.  The  Safety  Fund  money  will  not  only  possess 
this  power  equally  with  coins,  but  it  will  possess  the 
additional  quality  of  being  a  uniform  and  perfect  measure. 
By  establishing  a  uniform  rate  of  interest,  the  dollar  will 
be  of  invariable  value,  and  cannot  be  made  to  fluctuate 
more  in  the  measure  of  property  than  the  yard-stick  in 
the  measure  of  cloth.  Fourth,  it  must  have  power  to 
exchange  value.  Being  instituted  by  the  General  Govern- 
ment as  the  legal  tender,  and  its  income  power  estab- 
lished, all  persons  will  be  compelled  to  receive  it  in 
ex'change  for  property  and  labor.  We  have  elsewhere 
shown  that  any  portable  substance  possessing  these  prop- 
erties will  be  money.  The  Safety  Fund  money  will 
possess  all  the  properties  adapted  to  its  use  as  money 
that  belong  to  coins,  and  can  be  counted  and  carried  with 
greater  convenience,  and  can  be  more  easily  transmitted 
from  one  section  of  the  country  to  another.  The  effect  of 


278  A   TRUE   MONETARY    SYSTEM. 

its  adoption  will  be  to  annihilate  all  difference  of  exchange 
between  different  commercial  points,  or  to  reduce  it  to 
the  merely  nominal  expense  of  letter  postage. 


SECTION  II. 

THE   SECURITY    OF   THE   SAFETY   FUND   MONEY. 

It  will  be  perceived  that  since  the  rate  of  interest  on 
the  money  will  always  be  uniform,  and  loans  can  always 
be  obtained  from  the  Safety  Fund  on  productive  prop- 
erty, it  will  be  impossible  to  induce  a  financial  crisis, 
and  depreciate  the  value  of  the  property  on  which  the 
money  is  issued,  so  that  it  would  not  be  good  for  the 
interest.  Therefore  the  mortgages  will  always  be  ample 
security  for  the  loans  of  the  Safety  Fund;  and  the 
money  will  always  be  a  fair  equivalent  for  property 
and  lab'ov,  because  it  will  always  truly  represent  their 
value.  For,  if  the  money  can  be  loaned  for  a  per  centage 
interest  which  will  buy  a  certain  portion  of  the  yearly 
products  of  land  and  labor,  the  legal  value  of  the  princi- 
pal of  the  money  will  be  equal  to  the  actual  value  of  so 
much  land  as  will  produce  what  the  interest  will  purchase. 
When  Branches  are  established  in  all  the  States,  every 
individual  can  borrow  money,  at  the  usual  rate  of  inter- 
est, to  the  amount  of  half  the  value  of  his  productive 
land.  Every  dollar  thus  borrowed  will  be  added  to  the 
amount  in  circulation,  as  much  as  if  it  had  been  imported 
from  a  foreign  country  or  coined.  The  Safety  Fund  will 
actually  create  all  its  money. 

It  will  require  a  very  small  proportion  of  the  property 
of  the  country  to  secure  a,  sufficient  currency.  The  prop- 
erty in  Massachusetts,  according  to  the  assessed  valua- 
tion in  1840,  averaged  $406  50  to  each  individual.  The 
average  wealth  in  property  of  our  whole  population  is 


SECURITY   OF   THE   MONEY.  279 

from  three  to  five  hundred  dollars.  The  amount  of  money 
needed  will  not,  probably,  exceed  ten  or  fifteen  dollars 
for  each  inhabitant.  Therefore,  only  three  or  four  per 
cent,  of  the  property  of  the  country  will  be  necessary  to 
secure  an  ample  supply  of  money.  The  Government  can 
in  this  way  provide  a  portable  legal  value  to  any  extent 
that  may  be  required.  The  people  can  borrow  money 
from  the  Safety  Fund  in  larger  or  smaller  sums  at  pre- 
cisely the  same  rate  of  interest. 

The  mortgages  may  be  drawn  payable  one  year  after 
date,  with  one  and  one-tenth  per  cent,  interest ;  and  so 
long  as  this  interest  shall  be  regularly  paid,  the  principal 
may  remain,  in  whole  or  in  part,  at  the  option  of  the 
mortgagor.  So,  whenever  a  mortgagor  shall  have  the 
means,  he  can  pay  off  any  part  of  the  mortgage,  and 
stop  the  interest.  But  he  will  never  be  compelled  to 
pay  the  principal  so  long  as  the  interest  shall  be  regular- 
ly paid. 

No  aid  from  large  capitalists  will  be  required  to 
establish  the  Safety  Fund,  for  the  money  will  be  made  a 
balance  against  the  landed  estate  of  the  people,  without 
a  specie  basis.  It  is  no  more  necessary  to  make  money 
of  gold  and  silver  to  render  it  a  just  balance  against 
property,  than  to  make  a  mortgage  of  gold  or  silver  to 
render  it  of  equal  value  with  a  piece  of  land.  The  value 
of  the  mortgage  depends  upon  its  legal  power  over  the 
laud  and  its  products.  The  Safety  Fund  money  will  have 
a  legal  representative  value  which  will  be  capable  of 
purchasing  the  mortgage,  or  the  land,  or  the  products 
of  the  land.  The  mortgage,  or  the  money  as  such,  can 
be  no  more  valuable  made  of  gold  than  of  paper.  As 
paper  mortgages  amply  secure  individual  loans  of  money, 
so  paper  mortgages  will  secure  the  money  issued  by  the 
Safety  Fund.  If  people  will  readily  loan  gold  and  silver 
coins  for  paper  mortgages  on  property,  they  must  esteem 
the  paper  mortgages  as  valuable  as  the  coins.  A  mort- 


280  A  TKUE  MONETARY    SYSTEM. 

gage  is  a  lien  upon,  a  specific  piece  of  property.  The 
Safety  Fund  money  will  be  a  general  lien  upon  all  pro- 
perty for  sale,  and  a  legal  tender  in  payment  for  all  debts. 
The  mortgages  given  to  the  Safety  Fund  will  be  indivi- 
dual obligations  for  the  payment  of  money,  and  will  be 
necessarily  local.  But  the  money  issued  for  them  will  be 
neither  individual  nor  local.  It  will  be  equally  good  in 
Maine,  New  York,  Ohio,  and  Florida.  If  its  owner  does 
not  wish  to  lend  it  to  individuals,  he  can  lend  it  to  any 
Branch  of  the  Safety  Fund  at  an  interest  of  one  per 
cent. 

It  has  already  been  stated  that  it  is  no  more  necessary 
to  make  money  of  gold  and  silver  in  order  to  make  it 
good,  than  to  make  a  bond  or  note  on  a  silver  or  gold 
plate  in  order  to  make  it  good.  Still,  if  the  people  shall 
insist  upon  a  mixture  of  specie  in  the  currency,  it  can  be 
easily  provided.  It  will  only  be  necessary  that  the 
interest  to  be  received  and  paid  by  the  Safety  Fund  shall 
be  paid  in  specie.  By  loaning  money  at  one  and  one- 
tenth  per  cent.,  the  Fund  will  always  be  in  receipt  of 
many  times  the  interest  in  specie  that  it  can  be  called 
upon  to  pay.  This  will  preserve  the  use  of  coins  as 
money.  It  appears  evident,  however,  that  the  money 
of  the  Safety  Fund  will  fulfil  all  the  functions  of  a  public 
medium  of  exchange  without  any  admixture  of  coins. 

The  Safety  Fund  money  will  probably  be  compared  by 
some  to  the  assignats  of  France,  or  to  the  Continental 
money  issued  by  the  United  States  during  the  Revolution. 
But  they  are  no  more  alike  than  a  good  productive  soil 
and  a  desert.  There  is  as  much  difference  between  the 
paper  assignats  issued  by  France  and  the  paper  money 
to  be  issued  by  the  Safety  Fund,  as  between  two 
perpetual  mortgages,  one  bearing  interest,  and  the  other 
bearing  no  interest ;  the  first  would  be  good,  the  second 
worthless.  If,  as  heretofore  stated,  the  French  Govern- 
ment had  secured  the  payment  of  the  assignats  issued  to 


SECURITY   OF   THE   MONEY.  281 

her  citizens  by  mortgages  on  productive  landed  estate, 
not  exceeding  half  its  value,  and  when  payment  was 
demanded  had  funded  them  with  government  bonds  bear- 
ing a  yearly  interest,  they  must  have  continued  good. 
Both  the  mortgages  and  the  assignats  would  have  been 
representatives  of  property,  and  the  yearly  productions 
of  the  land  would  have  secured  the  annual  interest,  and 
made  them  safe.  The  assignats  became  worthless 
because  they  were  not  representatives  of  property.  If 
the  Government  of  the  United  States,  instead  of  issuing 
the  Continental  money,  had  established  a  Safety  Fund, 
and  had  lent  money  for  mortgages  on  productive  land 
worth  double  the  amount  of  the  loan,  and  had  provided 
notes  bearing  interest  to  fund  the  money,  such  paper 
money  would  have  been  a  representative  of  property, 
and  invariably  good.  The  Continental  money  not  being 
a  representative  of  property,  of  course  proved  worthless. 
Had  our  Government  instituted  a  Safety  Fund,  it  would 
have  had  an  abundance  of  money  for  the  transaction  of 
all  business ;  we  should  have  saved  the  many  millions  we 
paid  to  France  for  a  representative  of  our  OAvn  property, 
and  besides,  should  have  prevented  the  great  injury 
suffered  by  the  country  from  the  scarcity  of  money  and 
high  rates  of  interest,  which  then  so  much  retarded 
business  and  production. 

The  objection  may  ainse  that  if  the  loans  of  the  Safety 
Fund  be  confined  to  the  owners  of  land,  it  will  place  in 
their  hands  a  great  monopolizing  power,  and  instead  of 
diffusing  wealth  in  accordance  with  the  labor  performed, 
will  give  it  to  the  landholders.  But  a  little  reflection 
will  make  it  evident  that  the  abundant  supply  of  money 
and  the  reduction  of  the  rate  of  interest  will  be  of  equal 
benefit  to  those  who  are  without  property,  and  depend 
on  their  daily  labor  for  their  support.  The  owners  of 
land  will  obtain  loans  from  the  Fund,  either  to  purchase 
property,  or  to  discharge  debts,  or  to  pay  for  labor ;  and 


282  A   TRUE   MONETARY   SYSTEM. 

all  the  money  borrowed  for  these  purposes  will  go  into 
circulation,  and  be  used  by  others.  The  owners  of  land 
will  not  borrow  money  to  keep,  for  they  would  lose  the 
interest  on  it,  and  be  paying  interest  on  their  mortgages 
to  the  Safety  Fund.  Every  farmer  owing  money  on 
mortgage  of  his  farm,  and  paying  seven  per  cent,  inter- 
est, will  probably  borrow  money  from  the  Safety  Fund 
and  pay  the  debt.  The  difference  between  seven  and 
one  and  one-tenth  per  cent,  on  his  mortgage  will  be  in 
favor  of  the  earnings  of  his  own,  or  others'  labor  on  his 
farm;  the  interest  will  absorb  but  a  comparatively  small 
proportion  of  the  products.  The  receiver  of  the  pay- 
ment for  the  mortgage  cannot  obtain  a  higher  rate  of 
interest  than  that  charged  by  the  Fund :  he  must  either 
purchase  property  with  the  money,  or  lend  it  to  individ- 
uals at  one  and  one-tenth  per  cent.,  or  to  the  Safety 
Fund  at  one  per  cent,  interest.  If  he  finds  that  he  can 
rent  out  land  to  others  for  a  term  of  years  so  as  to 
secure  one  and  one-tenth,  or  one  and  one-quarter  per 
cent,  interest,  of  course  he  will  purchase  the  land  in 
preference  to  funding  the  money  ;  and  the  laborers  who 
can  have  the  use  of  land  at  these  low  rents,  will  soon  lay 
up  the  means  to  buy  farms  for  themselves.* 


SECTION"  III. 

THE   BATE   OF  INTEREST  ON  THE   SAFETY  FUND   MONEY. 

The  law  granting  to  all  the  privilege  of  lending  money 
at  the  same  rate,  has  an  apparent  fairness  which  is  de- 

*  If  a  laborer  who  had  no  property  to  be  represented  except  his 
power  to  labor,  could  borrow  money  from  the  Safety  Fund,  and  his 
power  to  labor  should  fail  by  sickness  or  death,  the  Safety  Fund 
would  still  be  bound  to  redeem  tliis  money  with  a  Safety  Fund  Note 
bearing  interest,  and  this  loss  would  fall  upon  the  people.  (See 
Appendix,  H.) 


RATE   OF   INTEREST   ON   THE   MONEY.  283 

ceptive.  The  fairness  depends  upon  the  justice  of  the 
rate  of  interest,  and  not  upon  the  universality  of  the 
grant. 

The  illustration  of  the  one  hundred  families  clearly 
shows  the  accumulative  power  of  money  at  six  per  cent, 
interest,  (see  Part  I.,  Chap.  III.,  Sec.  II.)  The  same  chap- 
ter shows  this  power  at  various  rates,  from  seven  down  to 
one  per  cent.  The  Safety  Fund  can  maintain  any  rate 
of  interest  which  shall  be  deemed  for  the  public  good. 
If  it  lend  money  at  six  per  cent.,  and  fund  at  the  same 
rate,  there  will  be  an  abundant  supply  at  a  uniform  in- 
terest in  all  parts  of  the  country;  this  currency  will 
therefore  be  greatly  superior  to  any  that  has  ever  been  in 
use.  If  $300,000,000  be  required,  and  the  interest  be  at 
six  per  cent.,  the  Government  will  gain  a  revenue  of 
$18,000,000  annually,  less  the  expenses  of  the  Institution. 
If  the  Branches  be  made  offices  of  discount  and  deposit, 
and  the  deposits  be  reloaned,  the  gains  will  probably 
be  doubled,  and  amount  to  say  $36,000,000.  There  is 
hardly  a  doubt  that  this  latter  or  a  larger  sum  is  annually 
paid  by  the  producers  to  the  banks  for  the  use  of  bank- 
notes. It  will  certainly  be  more  just  for  the  Govern- 
ment to  gain  this  for  the  general  benefit,  than  to  have  the 
banks  gain  it  for  their  private  purposes. 

But  a  rate  of  interest  that  will  rapidly  concentrate 
the  wealth  of  the  nation  into  the  hands  of  the  Govern- 
ment or  of  individuals,  cannot  be  just.  The  Government 
cannot  institute  money  and  lend  it  at  six  per  cent.,  with- 
out giving  power  to  individuals  to  lend  at  the  same  rate, 
and  the  loans  of  the  latter  will  be  much  greater  in 
amount  than  those  of  the  Fund,  even  if  its  Branches 
should  be  made  offices  of  discount  and  deposit.  Besides, 
as  has  been  already  shown,  money  is  a  standard,  and 
the  rate  of  interest  governs  the  per  centage  rent  on  all 
property.  No  way  can  be  devised  of  establishing  a  high 
rate  of  interest,  and  doing  justice  to  producers.  The  evi- 


284  A  TRUE   MONETARY    SYSTEM. 

dence  adduced  in  this  volume  upon  the  different  rates  of 
interest,  appears  sufficient  to  prove  that  one  and  one- 
tenth  per  cent,  is  as  high  a  rate  of  interest  as  money  can 
bear,  and  secure  the  rights  of  producers.  Money  at  this 
rate  will  have  power  to  buy  property ;  for  in  England  it 
has  often  been  lent  even  at  lower  rates,  after  business 
had  been  paralyzed  by  maintaining  interest  at  exorbi- 
tantly high  rates. 

Money  is  national  in  its  character,  and  ought  therefore 
to  be  authorized  only  by  the  General  Government.  The 
Government  should  never  allow  any  money  to  circulate  that 
is  not  permanently  safe  and  good,  and  a  legal  tender  in  pay- 
ment of  debts.  The  money  should  be  a  just  legal  equiva- 
lent in  exchange  for  labor  and  property,  and  at  par 
value  in  every  section  of  the  country.  To  be  thus  a  fair 
equivalent  of  uniform  value  throughout  the  country,  the 
rate  of  interest  must  be  made  just  and  uniform  ;  and  it  is, 
therefore,  of  the  first  importance  to  arrive,  as  nearly  as 
possible,  at  what  would  be  a  just  rate  per  cent,  interest. 
As  money  is  designed  for  public  use,  and  is  not  in  itself 
a  producing  power,  we  think  the  interest  on  the  money 
should  not  only  be  sufficient  to  pay  for  the  necessary 
material  and  labor  to  manufacture  the  money,  but  also 
for  the  necessary  labor  of  loaning  it,  as  well  as  for  the 
safe  keeping  of  any  money  that  might  remain  on  hand  un- 
used. Whatever  rate  per  cent,  interest  would  be  re- 
quired to  defray  the  necessary  expenses  of  furnishing  and 
issuing  a  full  supply  of  money  for  the  use  of  the  public, 
should  be  the  established  legal  rate  of  interest,  at  which 
all  subsequent  owners  of  the  money  might  lend  it.  The 
first  borrowers  of  the  money  would  directly  pay  it  over 
to  others  to  cancel  debts,  or  to  pay  for  property  and  pro- 
ducts. Hence  they  would  seldom  be  subsequent  owners 
and  lenders  of  the  money,  because  if  money  should  after- 
ward come  into  their  hands,  they  would  be  more  likely 
to  pay  off  their  own  debts,  and  stop  the  interest,  than  to 


RATE   OF   INTEREST   ON   THE   MONEY.  285 

lend  the  money  on  interest,  and  still  continue  to  pay  in- 
terest on  their  obligations. 

If  it  should  take  $500,000,000  of  the  new  currency  to 
supply  this  nation  with  money,  and  the  rate  of  interest 
should  be  fixed  at  one  and  one-tenth  per  cent.,  the 
income  from  the  Safety  Fund  would  be  $5,500,000.  If  it 
should  take  $600,000,000,  it  would  make  an  income  of 
$6,600,000.  At  all  events,  we  think  this  rate  of  interest 
would  be  sufficient  to  supply  the  material  for  making  the 
money,  and  pay  for  the  labor ;  as  well  as  to  pay  the  officers 
and  clerks  employed  in  the  principal  Institution  and  in 
the  various  Branches  of  the  Safety  Fund.  A  just  rate  of 
interest  would  be  one  that  would  supply  the  money  and 
keep  the  Safety  Fund  in  operation.  Thus  the  Safety 
Fund  would  be  a  self-supporting  institution.  No  good 
reason  can  be  shown  why  the  interest  should  be  greater 
than  is  necessary  to  furnish  the  money  and  keep  in 
operation  the  means  of  supplying  it. 

There  is  as  great  a  difference  in  their  effects  between 
a  well  regulated  currency  with  a  low  rate  of  interest  that 
will  justly  distribute  productions,  and  a  currency  with 
high  and  fluctuating  rates,  as  between  the  fire  limited  to 
the  domestic  hearth,  subserving  the  wants  of  the  house- 
hold, and  the  same  element  exceeding  its  useful  limits, 
and  destroying  the  house.  Steam  kept  within  proper 
bounds  is  usefully  employed  in  facilitating  production^ 
but  increased  beyond  these,  it  becomes  a  powerful  agent 
in  destroying  life  and  property.  Money  with  the  in- 
terest kept  within  proper  limits,  will  distribute  the  pro- 
duction rightfully  to  the  producers;  but  iucreased  in- 
terest will  deprive  them  of  their  rights,  and  entail  upon 
them  poverty  and  misery. 


286  A   TBUE   MONETARY   SYSTEM. 

SECTION  IV. 

ORGANIZATION   AND   MANAGEMENT   OF  THE  SAFETY  FUND. 

The  Safety  Fund  may  consist  of  a  Principal  Institution 
with  Branches.  The  first  may  be  located  at  Washington, 
or  some  other  central  town,  and  the  latter  wherever  con- 
venience may  require.  The  Principal  Institution  should 
issue  money  only  to  the  Branches,  and  they  should  be 
required  to  make  weekly  reports  to  the  Principal  of  their 
loans,  and  also  of  the  money  returned  to  be  funded.  The 
Principal,  at  certain  times,  should  report  the  money  in 
circulation. 

For  the  management  of  the  Principal,  one  director 
may  be  appointed  by  each  State,  and  one  or  more  by  the 
General  Government. 

The  States  may  elect  the  directors  of  the  Branches  by 
Congressional  Districts,  or  otherwise. 

The  directors  should  receive  salaries  for  their  services, 
and  should  not  be  allowed  to  borrow  mdney  from  the  In- 
stitution, nor  be  interested  in  any  of  its  loans.  They  may 
hold  their  offices  during  good  behavior,  or  until  a  certain 
age.  All  officers  and  clerks  may  be  required  to  give 
bonds,  with  such  securities  as  may  be  deemed  necessary 
to  secure  fidelity  and  safety. 

All  money  loaned  may  be  paid,  in  whole  or  in  part,  at 
the  option  of  the  borrower  after  one  year,  but  the  in- 
terest should  be  punctually  paid. 

In  case  of  failure  for  a  certain  time  to  pay  the  interest, 
the  directors  might  advertise  the  property  covered  by 
the  mortgage,  and  sell  it  at  auction,  giving  the  debtor 
timely  notice  of  such  advertisement  and  sale. 

Twenty-one  different  denominations  of  money  will 
form  an  ample  currency:  viz.,  Three  Cents  ;  Four  Cents; 
Five  Cents;  Ten  Cents;  Twenty-five  Cents;  Fifty 


ORGANIZATION    AND   MANAGEMENT.  287 

Cents  ;  One  Dollar ;  Two  Dollars  ;  Three  Dollars ;  Five 
Dollars  ;  Ten  Dollars  ;  Twenty  Dollars  ;  Fifty  Dollars  ; 
One  Hundred  Dollars;  Two  Hundred  Dollars;  Three 
Hundred  Dollars  ;  Five  Hundred  Dollars  ;  One  Thousand 
Dollars  ;  Two  Thousand  Dollars  ;  Three  Thousand  Dol- 
lars ;  Five  Thousand  Dollars.  With  these  denominations 
of  money  any  change  can  be  made  to  a  cent. 

Our  present  bank-notes  are  frequently  altered  from 
one  denomination  to  another ;  as,  for  instance,  by  ex- 
tracting "  Two "  and  inserting  "  Ten."  Against  this 
fraud  the  money  of  the  Safety  Fund  may  be  effectually 
guarded,  by  making  the  size  of  the  paper  conform  to  the 
denominations.  The  value  of  each  piece  will  then  be 
known  at  a  glance  by  its  size,  as  well  as  by  the  engrav- 
ing. The  three  cent  pieces  may  be  made  an  inch  and  a 
half  long  and  an  inch  wide ;  and  the  size  may  be  increased 
for  each  successive  higher  denomination  by .  adding  a 
quarter  of  an  inch  to  the  width  and  half  an  inch  to  the 
length.  The  different  denominations  may  also  be  of 
different  plates  as  well  as  of  different  sizes. 

The  people  throughout  the  country  will  soon  become 
familiar  with  the  money,  and  there  will  be  little  danger 
of  deception  by  counterfeits. 

The  paper  for  the  money  and  Notes  may  be  manufac- 
tured by  the  principal  Safety  Fund,  and  farther  guarded 
from  counterfeit  by  water  marks,  and  by  the  kind  and 
quality  of  the  paper,  which  should  be  of  the  best  material 
for  durability. 

In  preparing  the  money  for  circulation  no  necessity 
will  exist  for  the  signatures  of  the  president  and  cashier, 
more  than  for  such  signatures  on  coins.  Proper  care  in 
regard  to  the  material  and  making  of  the  paper,  and 
the  engraving  of  the  plates,  etc.,  will  guard  the 
money  against  counterfeits  more  effectually  than  the 
quality  and  coinage  of  the  precious  metals  can  protect 


288  A    TRUE   MONETARY   SYSTEM. 

A  simple  and  short  form  of  a  mortgage  may  be  pro- 
vided, so  drawn  as  to  save  the.  necessity  of  a  bond,  and 
prevent  a  multiplicity  of  papers.  With  ordinary  care  in 
the  institution  and  direction  of  the  Safety  Fund,  there 
will  be  incomparably  less  danger  of  frauds  than  now  exists 
in  banks. 

The  money  for  the  amounts  under  a  dollar  will  prob- 
ably be  called  by  the  opposers  of  the  Safety  Fund,  shin- 
plasters,  rag-money,  a  very  unsafe  currency  for  laborers, 
etc.,  but  every  one  of  these  small  notes  will  be  a  repre- 
sentative of  its  nominal  amount  of  property.  They  will 
maintain  their  relative  value  to  every  other  piece  of 
money  in  every  section  of  the  country,  and  will  soon  be 
esteemed  far  preferable  to  the  small  silver  and  copper 
coins  now  in  use. 

SECTION  V. 

THE  PROBABLE  AMOUNT  OF  THE  SAFETY  FUND  MONEY. 

'  The  quantity  of  money  used  in  business  is  very  small 
compared  with  the  amount  of  business  transacted,  for  it  is 
only  the  average  balance  kept  on  hand.  If  a  man  receive 
$10,000,  keep  it  one  hour,  and  then  pay  it  out,  he  uses 
the  money  only  one  hour.  A  man  may  be  worth  half  a 
million  of  dollars  and  transact  a  business  of  a  million  a 
year,  and  yet  his  average  balance  may  not  exceed  five 
thousand  dollars.  If  he  deposits  his  money  in  bank,  the 
bank  makes  an  estimate  of  his  balance  and  lends  it  to 
others  ;  so  that  even  this  balance  is  constantly  in  use. 

The  amount  of  money  used  compared  with  the  con- 
tracts fulfilled  by  it,  is  not  much  greater  than  the  number 
of  bushels  used  compared  with  the  bushels  of  grain  mea- 
sured by  them.  The  amount  which  can  be  kept  in  active 
circulation  is  comparatively  small.  If  the  Safety  Fund  be 
established,  and  loan  at  an  interest  of  one  and  one-tenth 


PROBABLE   AMOUNT   OF   THE   MONEY.  289 

per  cent,  on  all  good  security,  money  will  circulate 
rapidly  ;  and  if  all  other  money  be  swept  from  the  coun- 
try, it  is  doubtful  whether  the  Safety  Fund  can  keep  out 
a  sum  exceeding  from  twelve  to  fifteen  dollars  for  each 
inhabitant.  Estimate  the  population  of  the  United 
States  at  thirty  millions,  and  $15  to  each  inhabitant  will 
amount  to  $450,000,000.  Allow  this  sum  to  change 
hands  three  times  a  week,  and  it  will  cancel  $1,350,000,000 
of  debts  each  week,  and  in  one  year  $70,200,000,000. 
The  assessed  value  of  all  real  and  personal  property  in 
the  United  States  is  probably  about  $10,000,000,000. 
The  $450,000,000  passing  three  times  a  week,  will  in  one 
year  pay  for  more  than  seven  times  the  assessed  value  of 
the  whole  property  of  the  nation.  It  is  not  intended 
that  the  Safety  Fund  and  its  Branches  shall  be  made 
offices  of  discount  and  deposit.  If  they  should  be  made 
such,  they  would  more  than  double  the  amount  of  their 
loans ;  but  the  increase  of  loans  would  not  augment  the 
amount  of  money.  They  would  lend  the  money  left  on 
deposit,  and  thus  increase  their  income,  as  banks  now 
lend  their  deposits  and  gain  the  interest.* 

*  With  the  Safety  Fund  money,  if  fifty  millions  were  hoarded  and 
withdrawn  from  circulation,  the  amount  could  be  at  once  supplied ; 
and  it  would  not  in  the  least  disturb  the  regular  interest  or  the  value 
of  the  money.  The  Fund  would  still  receive  the  interest  on  the  fifty 
millions;  and  those  who  hoarded  it  would  lose  the  interest,  and  could 
gain  no  advantage  over  others  by  again  laying  out  the  money,  because 
their  hoarding  would  not  have  made  money  any  less  plenty,  and  when 
they  put  it  again  in  use,  it  would  not  in  the  least  alter  the  rate  of 
interest,  but  would  find  its  way  to  the  Safety  Fund,  and  pay  a  debt 
due  to  the  institution,  or  it  would  be  loaned  to  the  Fund  for  a  Safety 
Fund  Note  bearing  interest.  When  money  is  hoarded  it  is  taken  out 
of  use,  and  it  is,  therefore,  as  necessary  to  supply  the  amount  thus 
withdrawn  as  if  it  did  not  exist,  for  it  is  of  no  use  to  the  public  so  long 
as  it  is  hoarded.  The  Safety  Fund  would  be  as  independent  of  capi- 
talists as  of  laborers ;  nor  could  the  Rothschilds  with  the  aid  of  the 
Bank  of  England  affect  our  money  or  disturb  the  business  of  the 
nation.  (See  Appendix  I.) 

13 


CHAPTER    m. 

THE  ADVANTAGES  OF  THE  SAFETY  FUND  MONEY 
OVER  SPECIE. 

THE  following  illustrations  will  show  the  different 
effects  of  a  specie  and  a  paper  currency  upon  the  pros- 
perity of  countries  having  materials  for  the  formation 
of  either.  Suppose  two  fertile  islands  to  exist,  each  con- 
taining a  silver  mine  as  productive  as  the  average  of 
those  now  worked.  Two  parties,  of  a  hundred  thousand 
settlers  each,  emigrate  to  these  islands,  taking  with  them 
implements  of  husbandry,  a  stock  of  cattle,  merchandise, 
tools,  etc.,  and  provisions  for  a  year,  in  procuring  which 
they  nearly  exhaust  their  money.  Arrived  at  their 
respective  destinations,  they  locate  their  lands,  etc.,  and 
each  party  begins  to  make  exchanges  among  its  mem- 
bers. The  want  of  money  is  soon  severely  felt.  The 
inhabitants  of  one  island  determine  to  have  a  metal  cur- 
rency, and  accordingly  prepare  to-work  their  silver  mine. 
One-fifth  of  the  whole  population,  i.  e.,  twenty  thousand, 
are  men  capable  of  labor.  Three  thousand  engage  in 
working  the  mine,  and  with  their  families  constitute  a 
population  of  fifteen  thousand,  who  consume  the  pro- 
ducts of  others.  Suppose  each  man  to  earn  or  make 
half  a  dollar  a  day ;  total  in  a  year  four  hundred  and 
fifty  thousand  dollars.  This  sum  being  exchanged  by 
the  miners  for  food,  clothing,  etc.,  goes  into  immediate 
circulation.  It  will  require  nearly  three  years  to  supply 
the  money  necessary  for  their  internal  exchanges,  say 
$12  for  each  inhabitant,  *.  e.,  $1,200,000  ;  and  during  this 


THE   MONEY    6TTPEBIOR   TO   SPECIE.  291 

period  money  must  be  very  scarce.  The  shipment  of  any 
specie  abroad  to  pay  for  goods,  will  increase  the  want  of 
money  at  home.  Suppose  the  population  to  increase 
three  per  cent.,  that  is,  three  thousand  a  year,  they  must 
continue  to  mine  $36,000  yearly,  to  maintain  the  propor- 
tion of  $12  to  each  individual. 

The  inhabitants  of  the  other  island  determine  not  to 
work  their  silver  mine,  but  to  establish  a  Safety  Fund, 
and  lend  the  paper  money  as  heretofore  stated.  All 
have  the  opportunity  to  borrow  to  one-half  the  value  of 
their  productive  land.  This  money  costs  nothing  but  the 
comparatively  trifling  labor  of  the  paper  and  engraving. 
If  a  surplus  be  in  circulation,  its  owner  can  at  any  time 
pay  oft'  a  mortgage  to  the  Fund  and  stop  the  interest, 
or  fund  the  money  and  receive  interest-  The  exact 
amount  required  will  always  be  in  circulation,  and  the 
interest  being  regular,  the  value  of  the  money  will  be 
invariable. 

The  difference  between  the  labor  to  mine  and  coin  the 
silver  money,  and  the  labor  to  make  and  engrave  the 
paper  money,  will  be  a  clear  saving  to  the  island  using 
the  paper  money ;  and  all  this  difference  of  labor  can  be 
applied  to  the  production  of  articles  for  export.  The 
island  using  the  paper  money  can  export  about  as  great 
an  amount  of  products  as  the  other  island  will  coin  in 
money.  If  the  latter  island  require  the  products  of  the 
former,  and  exchange  coins  for  them,  the  former  island 
will  use  the  silver  money  for  manufactures,  or  for  export ; 
it  cannot  need  them  for  money.  If  the  Fund  lend  at  one 
and  one-tenth  per  cent,  interest,  the  island  will  always 
have  an  abundance  of  money  at  a  low  and  uniform  rate, 
so  that  every  branch  of  industry  can  be  carried  on  to  the 
best  advantage,  and  the  property  will  be  distributed  to 
those  whose  labor  shall  earn  it.  But  the  business  and 
productive  industry  of  the  island  using  coins  will  be  con- 
stantly retarded  for  want  of  money,  and  the  high  and 


292  A   TKUE   MONETARY    SYSTEM. 

fluctuating  rates  of  interest  will  inevitably  concentrate 
the  wealth  in  the  hands  of  a  few  capitalists,  and  leave 
the  producers  in  poverty.  The  people  of  the  island 
using  the  paper  currency  will  be  rich,  virtuous,  and 
happy,  while  those  using  the  silver  money  will  be  poor, 
wicked,  and  miserable,  because  poverty  and  avarice  will 
lead  to  crime.  If  the  two  islands,  instead  of  trading 
with  each  other,  maintain  trade  with  other  nations,  it 
must  be  obvious  that  the  one  using  the  paper  money 
will  have  a  great  advantage  over  the  one  using  the  silver 
money. 

Suppose  the  same  number  of  emigrants  to  settle  on  a 
third  island,  and  borrow  their  whole  currency  of  a  for- 
eign nation,  say  $1,000,000  in  gold,  silver,  or  paper 
money,  at  an  interest  of  eight  per  cent,  per  annum,  pay- 
able half  yearly.  If  their  imports  equal  their  exports, 
and  they  be  obliged  to  issue  bonds  every  six  mouths  at 
eight  per  cent,  to  pay  the  interest,  in  fifty-three  years 
the  island  will  become  indebted  to  foreign  nations 
$64,000,000 ;  $63,000,000  of  which  will  be  interest  on 
the  $1,000,000  originally  borrowed.  The  people  must 
lose  this  amount  in  consequence  of  defective  legisla- 
tion. If  the  emigrants  through  their  government  estab- 
lish a  Safety  Fund,  and  provide  their  own  currency, 
instead  of  importing  it,  they  will  save  the  whole  interest, 
besides  having  great  advantages  by  the  abundance  of 
money. 

Paper  money  can  be  as  easily  made  to  exceed  coins  in 
value,  as  coins  to  exceed  paper  money,  because  the  value 
of  all  money  is  governed  by  the  per  centage  interest. 
Let  the  Safety  Fund  lend  paper  money,  and  fund  it  with 
Safety  Fund  Notes  bearing  six  per  cent. ;  let  it  lend  coins, 
and  fund  them  with  Safety  Fund  Notes  bearing  but  four 
per  cent.,  and  the  paper  money  will  always  be  the  more 
valuable,  and  command  a  premium  in  exchange  for  the 
coins.  The  paper  money  wih1  as  certainly  command  a 


THE   MONEY   8UPEKIOR   TO   SPECIE.  293 

premium  above  the  coins,  as  a  ground  rent  at  six  per 
cent,  will  command  more  than  one  at  four  per  cent.  If 
this  nation  had  a  sufficient  quantity  of  specie  for  a  cur- 
rency, it  would  still  be  necessary  to  have  an  institution 
similar  to  the  Safety  Fund ;  for  the  interest  upon  it  could 
only  be  kept  regular  by  the  establishment  of  an  institu- 
tion to  make  loans  at  a  uniform  rate  of  interest  whenever 
good  security  was  offered,  and  to  fund  the  specie  when- 
ever it  was  redundant. 

A  government  may  obtain  an  immense  power  over 
the  property  of  the  people  by  furnishing  a  paper  currency 
at  six  per  cent,  interest.  Suppose  our  Government  to 
establish  a  Safety  Fund,  and  make  its  paper  money  the 
only  tender  in  payment  of  debts.  Let  the  Safety  Fund 
lend  an  amount  equal  to  say  $15  to  each  inhabitant  for  a 
population  of  20,000,000,  that  is,  $300,000,000,  and  money 
would  become  plenty.  This  sum  lent  on  double  its 
amount  of  landed  estate,  would  cover  $600,000,000  worth 
of  property.  If  the  Government  should  leave  the  prin- 
cipal outstanding  during  the  regular  payment  of  the 
interest,  it  would  receive  from  the  interest,  after  deduct- 
ing say  $1,000,000  for  the  expenses  of  the  Safety  Fund, 
an  annual  revenue  of  $17,000,000.  After  a  year  or  two 
let  the  Fund  refuse  to  make  further  loans,  and  yearly 
collect  its  net  gain  of  $17,000,000  for  ten  years,  f.  e., 
$170,000,000,  and  the  whole  business  of  the  nation  must 
be  transacted  with  the  remaining  $130,000,000.  This 
would  cause  a  great  sacrifice  of  the  mortgaged  property 
and  greatly  depress  the  price  of  other  lands  and  products. 
In  six  years  more,  the  Government  would  collect  in 
$102,000,000  additional  interest,  thereby  reducing  the 
currency  to  $28,000,000.  The  interest  for  two  years 
more  would  amount  to  $34,000,000,  but  only  $28,000,000 
could  be  paid,  because  the  whole  amount  of  money 
would  be  exhausted.  By  foreclosing  its  mortgages, 
the  Government  could  buy  the  $600,000,000  worth  of 


294  A   TEUE   MONETARY    SYSTEM. 

property  for  the  $6,000,000  which  would  still  be  due. 
Hence  it  is  evident  that  the  law  has  power  to  make 
paper  money  control  property  as  effectually  as  gold  and 
silver  coins. 


CHAPTER  IV. 
OBJECTIONS  TO  THE  SAFETY  FUND  CONSIDERED. 


SECTION  L 

OBJECTIONS   TO    A   PAPEB   CURRENCY    ON   ACCOUNT   OF 
FOREIGN   TRADE   CONSIDERED. 

WHEN  the  adoption  of  a  paper  currency  within  our 
own  limits  is  advocated,  questions  arise  concerning  the 
adjustment  of  our  debts  with  foreign  nations,  among 
whom  gold  and  silver  are  the  only  legal  tender.  Great 
embarrassments  are  apprehended  because  our  paper 
money  would  not  be  received  in  payment  of  debts  con- 
tracted and  payable  abroad. 

The  exports  and  imports  of  the  United  States  are 
nearly  equal  ;  probably  our  whole  exports  do  not 
amount  to  more  than  a  twentieth  part,  or  five  per  cent, 
of  the  yearly  productions  of  our  labor.  Certainly  the 
disposal  of  five  per  cent,  of  our  productions  is  not  a  suffi- 
cient reason  for  maintaining  a  metal  basis  for  our  cur- 
rency, which  must  inevitably  affect  the  market  value,  and 
disturb  the  regular  and  just  distribution  among  ourselves 
of  ninety-five  per  cent,  of  our  productions.  The  chief 
object  of  a  currency  is  to  effect  the  internal  exchanges 
of  products  with  facility  and  justice.  Such  a  one  could 


296  A   TRUE   MONETARY    SYSTEM. 

not  impair  foreign  trade,  nor  do  injustice  to  other  nations. 
The  following  illustrations  will  make  it  evident  that  the 
use  of  a  paper  currency  at  home,  instead  of  disturbing 
foreign  trade  would  greatly  facilitate  it.  Trade  between 
nations  is  carried  on  by  individuals,  and  not  by  govern- 
ments. The  governments  simply  make  the  laws,  and  fix 
the  standards  by  which  the  value,  weight  and  quantity 
of  articles  of  trade  are  to  be  determined,  as  also  the 
tariffs  of  duties  on  imports  and  exports.  Individuals, 
then,  export  or  import  goods  as  their  interests  dictate, 
and  receive  for  them  the  money  in  use  where  the  goods 
are  sold.  For  instance,  importers  of  goods  for  the  New 
York  market,  take  in  payment  for  their  sales  the  money 
current  in  the  city.  They  do  this  when  the  banks  pay 
specie.  They  did  the  same  in  1837,  when  the  banks  had 
suspended  specie  payments.  If  they  must  remit  the 
proceeds  of  the  goods,  they  buy  cotton,  or  other  produce 
for  shipment  and  sale  abroad,  or  bills  of  exchange,  or 
specie,  as  may  best  subserve  their  interest.  English  ex- 
porters to  New  York  receive  in  payment  for  their  goods 
our  current  money,  and  invest  the  money  as  they  deem 
most  profitable.  If  we  had  none  but  paper  money, 
English  exporters  to  New  York  would  sell  their  goods 
for  our  paper  money,  buying  with  the  proceeds  our  pro- 
ducts, cotton,  flour,  or  tobacco,  or  bills  of  exchange  on 
England,  or  bullion.  Or,  they  could  lend  the  money 
here  as  they  now  do  and  purchase  products  for  shipment 
to  England  with  the  interest,  or  reloan  the  interest.  If 
our  paper  money  would  buy  our  own  calicoes  and  broad- 
cloths, it  certainly  would  buy  English  calicoes  and 
broadcloths  in  our  own  market.  There  is  no  reason  why 
we  should  provide  a  currency  to  pay  for  the  products  of 
foreign  labor  different  from  that  which  pays  for  home 
labor. 

If  we  import  fifteen  millions  more  than  we  export,  this 
balance  will  draw  interest  against  us  until  we  can  pay  it 


OBJECTIONS   CONSIDERED.  297 

in  specie  or  products.  If  State  or  United  States  stocks 
be  sent  abroad  and  sold  to  pay  the  debt,  it  is  still  a 
form  of  credit  for  which  we  must  pay  the  interest. 
There  is  certainly  no  greater  necessity  for  our  Govern- 
ment to  provide  means  for  our  merchants  to  pay  their 
debts  to  foreign  merchants,  in  such  cases,  than  to  provide 
means  for  southern  merchants  to  pay  their  debts  to 
eastern  merchants,  in  cases  of  a  partial  failure  of  the 
cotton  crop.  When  in  any  year  southern  merchants  buy 
of  eastern  merchants  more  goods  than  their  crops  will 
pay  for,  the  latter  must  wait  for  the  next  crop,  mean- 
while receiving  interest  on  the  amount  due.  If  our  Gov- 
ernment maintains  a  currency  which  a  balance  of  imports 
over  exports  demanding  a  shipment  of  specie  must  neces- 
sarily derange,  and  subject  debtors  to  extravagant  rates 
of  interest,  this  legal  act  must  cause  greater  loss  to  the 
people  than  the  failure  of  the  crops  which  would  turn  the 
balance  of  trade  against  them.  The  only  embarrassment 
which  could  occur  in  our  foreign  trade,  from  the  use  of 
paper  money,  would  be  delays  in  payments  when  the  ex- 
ports should  exceed  the  imports;  and  the  occurrence 
even  of  this  would  be  rendered  much  less  probable  by 
the  use  of  paper  money,  at  a  low  rate  of  interest,  than  it 
is  with  our  banking  system,  and  high  rates  of  interest. 
The  greater  facilities  afforded  to  production  would  yearly 
save  an  immense  amount  of  imports ;  and  the  difference 
in  the  interest  account  between  the  United  States  and 
England,  would  save  our  people  many  millions  of  dol- 
lars every  year.  « -  • ' 

If  we  had  a  sound  paper  currency,  and  did  not  depend 
on  gold  and  silver,  to  make  our  internal  exchanges,  we 
could  send  all  our  gold  and  silver  coins  out  of  the  coun- 
try to  adjust  our  foreign  balances,  without  deranging  our 
monetary  affairs,  or  enabling  foreign  or  native  capitalists 
to  embarrass  the  exchanges  of  our  products  among  our- 
13* 


298  A  TKUE   MONETARY   SYSTEM. 

selves.  If  we  now  have  $50,000,000  *  of  coins,  we  could 
ship  them,  and  cancel  this  amount  of  our  debt  to  Eng- 
land, by  paying  our  Government  and  State  bonds,  and 
thus  save  $3,000,000  interest,  annually  paid  to  the  foreign 
holders  of  our  bonds,  for  the  use  of  a  representative  of 
our  own  property.  The  money,  too,  on  which  we  pay 
this  interest,  goes  mostly  into  the  vaults  of  our  banks,  and 
lies  there  dead,  while  our  bank-notes  make  the  exchanges. 
It  previously  lay  idle  in  the  vault  of  the  Bank  of  England, 
while  the  notes  of  that  Bank  performed  the  exchanges  in 
England. 

But  suppose,  upon  its  arrival  here,  every  dollar  of  the 
specie  should  go  into  active  circulation,  what  service 
would  it  render  us  ?  It  would  only  assist  us  to  effect  our 
internal  exchanges ;  we  should  still  be  obliged  to  make 
all  our  products  by  our  labor,  as  much  as  if  we  had  used 
our  own  paper  money  to  make  our  exchanges.  If 
the  Bank  of  England  should  send  $50,000,000  of  her 
bank-notes  to  the  United  States,  and  our  laws  should 
make  them  a  tender  for  debts,  they  would  be  no  more 
useful  to  us  than  $50,000,000  of  our  own  currency ;  and 
we  should  be  compelled  to  pay  to  England  $3,000,000 
worth  of  our  products  yearly,  in  interest.  If  we  sent  the 
bonds  of  our  Government  to  procure  the  notes  of  the 
Bank  of  England,  or  to  procure  the  coins,  the  property 
of  the  United  States  would  secure  the  money  while  it  re- 
mained here.  The  money  would  become  a  representa- 
tive of  our  property.  Before  it  could  again  become  a 
representative  of  the  property  of  England,  we  should 
have  to  send  back  the  $50,000,000  to  England  and  take  up 
our  bonds.  As  long  as  the  money  remained  here  we  should 
pay  to  England  $3,000,000  yearly,  in  interest,  because 
the  bonds  of  our  Government  bear  the  interest,  and  not 
the  money.  Money  is  always  a  dead  capital  in  the  hands 

*  Written  previous  to  the  introduction  of  gold  from  Californi 


OBJECTIONS    CONSIDERED.  299 

of  the  holder.  Even  after  its  arrival  here,  every  person 
who  kept  it  a  day,  would  keep  it  at  the  loss  of  the  in- 
terest for  that  day,  because  money  has  no  power  of 
growth  beyond  that  given  by  law,  which  is  as  impotent 
for  actual  production  as  the  picture  of  a  horse  is  to  per- 
form the  labor  of  the  horse.  We  might  as  well  pay 
to  England  $3,000,000  yearly  for  a  man  to  represent  us 
in  Congress,  as  to  pay  this  sum  for  a  representative  of 
our  property. 

With  a  just  monetary  system,  we  should  no  more  de- 
pend upon  a  foreign  nation  for  money  to  represent  our 
own  property  in  our  own  country,  than  for  the  air  we 
breathe.  When  we  make  our  own  property  the  basis  of 
our  currency,  and  furnish  all  the  money  we  need  for  the 
exchange  of  our  own  products  among  ourselves,  no  for- 
eign nation  will  have  power  to  affect  our  money  market, 
and  derange  the  internal  exchanges  of  our  products,  more 
than  it  could  induce  a  scarcity  of  air,  and  thus  disturb  our 
breathing.  No  scarcity  or  abundance  of  money  in  foreign 
nations  would  affect  our  monetary  system.  Gold  and 
silver  coins  would  be  imported  only  to  convert  into 
utensils  and  ornaments,  or  for  re-exportation — these 
metals  could  never  be  needed  for  money.  If  a  paper 
currency  in  this  nation  were  properly  instituted,  it  would 
become  known  in  England,  and  it  would  be  a  thousand 
times  more  likely  to  be  received  there  than  our  bank 
paper.  But  if  it  would  not  pass  there  at  all,  many  advan- 
tages are  to  be  anticipated  from  its  adoption.  Bills  of  ex- 
change, on  foreign  nations,  could  be  much  more  easily 
obtained  than  at  present,  because  balances,  under  this 
system,  would  probably  be  in  our  favor.  If  our  mone- 
tary system  were  such  as  always  to  supply  the  necessary 
quantity  of  money  at  a  just  and  uniform  rate  of  interest, 
so  that  production  should  never  be  impeded  by  a  scarcity 
of  money  or  high  rates  of  interest,  no  one  acquainted 
with  the  trade  and  resources  of  our  country  can  doubt 


300  A   TRUE   MONETARY    SYSTEM. 

that  the  amount  of  our  yearly  productions  would  be 
increased  several  hundred  millions  of  dollars.  The 
greater  the  amount  of  our  productions,  the  gi-eater  the 
amount  that  we  should  have  to  export,  and  the  less  we 
should  need  to  import,  and  the  balance  of  trade  would 
necessarily  be  in  our  favor ;  and  this  balance  we  should 
be  compelled  to  take  in  gold  and  silver,  or  leave  on  in- 
terest in  foreign  nations.  The  foregoing  considerations 
make  it  evident  that  no  unfavorable  results  are  to  be  ap- 
prehended to  our  foreign  trade  from  the  adoption  of  a 
paper  currency  at  home. 


SECTION   II. 

SUNDRY    OBJECTIONS — THE   EFFECTS  OF  THE  SAFETY  FUND 
ON    OUR   BANKING   INSTITUTIONS,   ETC.,    CONSIDERED. 

It  may  be  well  to  examine  a  few  more  of  the  prominent 
objections  which  will  be  urged  against  the  adoption  of 
the  Safety  Fund.  Our  banking  institutions  will  probably 
complain  that  its  establishment  will  infringe  the  chartered 
rights  granted  to  them  by  the  States.  But  in  instituting 
the  Safety  Fund,  the  General  Government  will  not  with- 
draw their  charters,  nor  pass  any  law  preventing  them 
from  banking.  Doubtless  it  has  the  right  to  prohibit  the 
issue  of  such  bills  of  credit  as  bank-notes ;  but  this  will 
not  be  necessary.  The  Government  will  simply  provide 
a  means  whereby  the  people  in  every  section  of  the 
country  can  obtain  a  fair  representative  of  their  produc- 
tive landed  estate,  at  one  and  one-tenth  per  cent,  interest, 
instead  of  being  compelled  to  procure  from  banks  and 
individuals  an  imperfect  and  unsafe  representative  of 
their  property,  and  at  six,  seven,  or  eight  per  cent,  inter- 
est; as  much  for  the  use  of  a  representative  as  the 
crops  of  their  land  are  worth. 


OBJECTIONS   CONSIDERED.  301 

It  is  a  frequent  remark  that  legal  enactments  have  no 
more  effect  upon  the  value  of  money  than  upon  the  price 
of  wheat,  and  that  competition  in  lending  money  will 
equitably  regulate  the  rate  of  interest.  By  establishing 
the  Safety  Fund  to  lend  money  at  one  and  one-tenth  per 
cent,  to  all  who  offer  the  required  security,  and  not 
interfering  with  the  chartered  privileges  of  the  banks,  we 
shall  ascertain  whether  legal  enactments  have  any  power, 
and  the  advocates  of  regulating  the  rate  of  interest  by 
competition  among  the  lenders  of  money,  will  also 
have  an  opportunity  to  test  the  correctness  of  their 
opinions. 

Banks  will  object  that  they  do  business  on  a  specie 
basis,  and  the  Safety  Fund  on  a  land  basis.  It  may  be 
difficult  to  show  that  the  former  is  better  than  the  latter ; 
for  all  kinds  of  money  must  be  as  useless  without  land 
and  products  to  be  exchanged,  as  yard-sticks  with 
nothing  to  be  measured.  It  will  be  fair  towards  the 
farmers,  mechanics,  and  merchants,  for  the  Government 
to  institute  a  paper  currency,  and  equally  fair  towards 
the  banks  ;  for  their  bank-notes  are  no  more  legally  pay- 
able in  specie  than  the  indorsed  and  other  notes,  and 
even  the  book  accounts  of  private  citizens.  If  the  Safe- 
ty Fund  money  will  be  a  safe  medium  of  exchange  for 
products,  it  will  be  a  just  equivalent  to  pay  debts  to 
banks,  because  the  stockholders  can  buy  products  or  land 
with  it ;  therefore  the  issue  of  a  tender  based  on  landed 
estate  cannot  do  injustice  to  our  banking  institutions. 

The  Safety  Fund  money  being  made  the  legal  tender, 
the  banks  cannot  refuse  to  receive  it  in  payment  of  debts. 
They  can  easily  and  safely  collect  in  their  dues,  with- 
draw their  circulation,  and  wind  up  their  business 
without  causing  a  scarcity  of  money,  or  any  panic  in  the 
money  market.  We  shall  then  have  nothing  circulating 
as  money  which  is  not  a  legal  tender.  If  the  banks  shall 
still  deem  their  specie  more  valuable  than  the  paper 


302  A  TRUE   MONETARY    SYSTEM. 

money  of  the  Safety  Fund,  and  in  closing  up  their  busi- 
ness shall  not  have  as  much  specie  to  divide  among  the 
stockholders  as  they  originally  paid  in,  or  if  they  shall 
have  to  pay  the  whole  capital  stock  in  Safety  Fund 
money,  still  no  injustice  will  be  done  to  them,  for  the  law 
making  paper  money  a  tender  in  payment  of  debts, 
gives  to  it  a  value  equal  to  that  possessed  by  gold  and 
silver  money  regulated  at  the  same  rate  of  interest. 
While  the  establishment  of  the  Safety  Fund  can  do  no 
wrong  to  the  banks,  it  will  greatly  benefit  those  en- 
gaged in  production  and  distribution. 

Believers  in  the  great  intrinsic  value  of  gold  and 
silver  coins,  have  nothing  to  apprehend  from  the  adoption 
of  paper  money  as  a  tender  in  payment  of  debts,  and 
the  reduction  of  interest.  The  institution  of  paper 
money,  and  the  rejection  of  coins  as  a  tender,  can  have 
no  more  effect  on  the  intrinsic  value  of  the  precious 
metals,  or  upon  the  desire  to  possess  them  on  account  of 
this  value,  than  the  enactment  of  a  law  that  wheat  shall 
be  transported  only  on  horseback  will  alter  the  nutritious 
properties  of  the  wheat,  and  the  desire  to  use  it  for 
food.  One  would  suppose  that  those  who  so  highly  prize 
gold  and  silver  coins  for  their  intrinsic  value,  would  be 
strong  advocates  of  paper  money;  the  coins  being 
released  from  their  use  as  money,  the  gold  and  silver 
would  easily  and  naturally  fall  into  their  hands.  * 

It  may  be  objected  that  if  money  be  made  so  plenty, 
the  people  will  run  into  extravagant  speculations  ;  but  a 
little  thought  will  make  it  evident  that  the  system  will 
prevent  great  fluctuations  in  the  price  of  property,  and 
of  course  remove  the  inducements  for  speculations,  f 

*  For  thousands  who  are  now  compelled  to  have  them  to  pay  debts 
would  not  u*e  them ;  and  those  who  love  them  for  their  inherent 
value,  could  easily  obtain  them,  and  could  keep  them  to  look  at  for 
a  lifetime  without  injury  to  others. 

f  See  Appendix,  J. 


OBJECTIONS   CONSIDERED.  303 

It  may  be  objected  that  so  great  an  alteration  in  the 
medium  of  exchange  and  measure  of  value,  will  derange 
and  unsettle  the  value  of  property,  introduce  confusion 
into  the  various  branches  of  business,  and  break  down 
all  existing  relations  between  money  and  property.  But 
in  substituting  a  better  for  a  worse,  the  means  to  effect 
the  change  must  be  improvements ;  and  every  stage, 
from  the  commencement  to  the  entire  exclusion  of  the 
present  currency,  will  be  a  succession  of  benefits  to  the 
mass  of  the  people.  The  change  will  only  lessen  the 
power  of  capital  over  the  future  productions  of  labor. 
It  will  deprive  no  man  of  the  use  of  his  property  or 
money ;  both  will  be  at  his  disposal  as  much  as  under 
the  present  monetary  system. 

Another  objection  wih1  be  the  risk  incurred  by  unfaith- 
fulness in  the  officers  appointed  to  manage  the  Institution. 
Every  institution  must  have  officers,  and  a  certain  amount 
of  power  must  necessarily  be  confided  to  them ;  conse- 
quently a  risk  of  unfaithfulness  must  be  incurred.  But 
other  circumstances  being  equal,  the  risk  is  greater  or 
less,  in  proportion  to  the  action  of  self-interest ;  and  ac- 
cording to  the  plan  of  the  Safety  Fund,  no  officer  will  be 
allowed  to  borrow  money  from  the  Fund,  nor  to  be  inte- 
rested in  any  of  its  loans.  Bonds  will  also  be  required  for 
the  faithful  discharge  of  duty.  But,  granting  there  may 
be  risk,  yet  it  will  be  almost  nothing  compared  with  that 
now  incurred  under  the  banking  system,  where  the 
officers  have  their  own  interests  to  serve  in  various 
ways,  and  especially  by  increasing  the  rates  of  interest 
and  using  the  funds  of  the  banks  for  their  private  ad- 
vantage. 

It  may  also  be  objected  to  the  Safety  Fund,  that  it 
will  lessen  the  incomes  of  widows  and  orphans ;  but  there 
are  very  few  of  this  class  who  have  incomes.  Objectors 
on  this  ground  will  therefore  do  well  to  extend  their  sym- 
pathy so  as  to  embrace  the  nine-tenths  whose  only  means 


304:  A   TRUE   MONETARY    SYSTEM. 

of  support  is  the  scanty  compensation  for  their  daily  and 
excessive  toil,  and  whose  condition,  and  the  reward  of 
whose  labor,  as  well  as  the  earnings  of  those  who  have 
incomes,  will  be  greatly  improved  by  the  reduction  of 
the  interest  on  capital.  Their  sympathies  will  then  lead 
them  to  advocate  the  Safety  Fund,  unless  they  are  actuated 
by  some  other  motive  than  commiseration  for  the  needy. 
The  greatest  difficulty,  however,  to  be  apprehended  in 
the  introduction  of  the  new  currency,  will  be  found  in 
the  attachment  of  the  people  to  ancient  laws  and  customs, 
sanctioned  by  the  greatest  statesmen  of  the  past,  and 
ages  of  experience  ;*  but  this  feeling  operates  with  the 

*  Is  the  fact  that  these  unjust  monetary  laws  have  been  in  force  from 
the  earliest  ages,  and  produced  in  every  civilized  nation  their  natural  evil 
effects,  any  good  reason  for  the  continuance  of  such  laws  ?  Are  evils 
any  less  evils  because  they  are  sanctioned  by  the  laws  of  ages  ?  On 
the  contrary,  do  not  the  evils  increase  as  countries  grow  older ;  and 
do  not  the  wealth  and  power  become  more  and  more  centralized,  and 
the  laboring  classes  more  and  more  impoverished  until  oppression  in- 
duces civil  wars  and  the  overthrow  of  governments  ?  This  has  been 
the  experience  of  nations  for  ages.  There  is  now  in  every  civilized 
nation  a  continual  strife  between  capital  and  labor.  Has  there  ever 
been  a  nation  in  which  the  wealth  has  centralized  with  more  rapidity 
than  during  the  last  ten  years  in  this  free  Republic  ?  How  can  we  ex- 
pect to  continue  this  centralizing  power  and  yet  ward  off  its  evil  effects? 
Common  sense  teaches,  and  experience  proves,  that  like  causes  pro- 
duce like  effects;  and  if  we  persist  in  giving  to  money  this  unjust 
centralizing  power,  it  will  eventually  seal  the  fate  of  this  nation  as  it 
has  that  of  other  nations  in  past  ages.  People  do  not  seem  to  con- 
sider that  the  laws  of  right  existed  before  human  laws  were  instituted, 
but  seem  to  take  it  for  granted  that  the  institution  of  these  monetary 
laws  gives  existence  to  justice  and  truth  ;  and  therefore  all  men  are 
bound  to  look  upon  them  with  the  same  awe  and  submission  as  if  they 
were  founded  upon  the  eternal  principles  of  justice.  But  justice  and 
truth  are  prior  to  all  human  laws ;  and  these  monetary  laws  are  in 
direct  opposition  to  every  act  of  God's  providence,  and  every  just 
right  of  man ;  and  are  the  most  egregious  national  sin  that  was  ever 
organized,  or  instituted,  because  the  evil  extends  as  far  as  these  mone- 
tary laws  extend,  corrupting  all  contracts  between  man  and  man,  and 


OBJECTIONS    CONSIDERED.  305 

same  force  in  other  things,  and  has  been  found  to  yield 
in  favor  of  improvements  introduced  by  the  progress  of 
discoveries  in  the  arts  and  sciences.  There  needs  only 
undoubted  proof  that  an  evil  exists,  and  that  a  remedy 
can  be  applied  for  its  removal,  in  order  to  secure  the  re- 
formation. We  have  already  shown  that  great  evils  have 
arisen  from  the  unjust  monetary  laws  of  the  past,  and  to 
our  mind,  conclusive  proof  has  been  offered  to  sustain 
this  point.  It  is  now  incumbent  on  objectors  to  show, 
for  instance,  that  the  inhabitants  of  cities  produce  more 
for  the  people  of  the  country  than  the  latter  produce  for 
the  former ;  that  a  man  by  standing  on  the  corner  of  a 
street  a  few  hours  in  a  day  to  lend  the  legal  representa- 
tive of  value  to  the  necessitous  at  exorbitant  rates  of  in- 
terest, produces  more  of  the  necessaries  of  life  than  a 
hundred  industrious  farmers  and  mechanics  ;  that  the 
yearly  use  of  the  present  bank-notes  in  the  State  of  New- 
York  is  really  worth  as  much  to  the  people  as  the 
$4,435,333  worth  of  products  which  they  are  compelled 
to  sell  annually  to  pay  the  interest ;  or  that  one  and  one- 
tenth  per  cent,  interest  would  secure  to  producers  a 
greater  proportion  of  the  products  of  their  labor  than 
they  are  entitled  to  receive.  If  they  can  prove  that  the 
productiveness  of  land  and  labor  is  in  proportion  to  the 
rate  of  interest,  or  that  the  public  good  requires  that  the 
wealth  should  be  concentrated  in  a  few  hands,  they  will 
then  have  shown  the  superiority  of  our  present  monetary 
system.  These  are  things  of  which  farmers  and  mechan- 
ics and  other  producers  can  judge  as  well  as  any  states- 
man or  lawyer  in  the  country.  If  scarcity  of  money  and 
high  rates  of  interest  do  not  affect  the  market  value  of 


between  nation  and  nation,  making  the  individuals  who  earn  the 
wealth  tributary  to  those  who  possess  this  monetary  power  ;  and  even 
making  one  nation  tributary  to  another  that  merely  furnishes  a  repre- 
sentative of  the  wealth. 


306  A  TEUE   MONETARY   SYSTEM. 

labor  and  products,  let  it  be  clearly  shown  to  the  pro- 
ducing classes.  If  such  questions  be  evaded,  it  is  but 
fair  to  infer  that  the  advocates  of  existing  monetary  laws 
are  willing  or  desirous  that  the  oppression  of  the  pro- 
ducers should  be  continued,  and  the  people  be  kept  igno- 
rant of  the  causes  of  their  poverty,  instead  of  having 
the  reward  of  their  labor  and  their  business  transactions 
regulated  by  a  standard  which  they  will  perceive  to  be 
just,  and  of  which  they  can  understand  the  operation. 

It  may  be  admitted  that  the  theory  of  the  Safety  Fund 
is  good,  but  impracticable  at  present ;  it  is  calculated  for 
some  future  generation,  when  men  shall  have  become 
more  intelligent  and  virtuous.  If  the  same  faith  shall 
be  held  by  the  generations  which  are  to  follow  us,  it  will 
be  difficult  to  point  out  at  what  period  this  desirable  re- 
formation will  occur,  because  the  evil  of  our  present  sys- 
tem will  always  be  in  the  present,  and  the  good  of  the 
plan  proposed  in  the  future.  We  are,  however,  per- 
suaded that  a  large  majority  of  the  people  are  aware 
that  their  present  depressed  condition  may  and  should 
be  exchanged  for  something  better,  and  the  Safety  Fund 
will  be  regarded  by  them  as  neither  too  Utopian  nor 
visionary  to  be  made  immediately  operative  for  their  bene- 
fit. All  the  objections  to  the  proposed  currency,  upon 
the  ground  that  it  will  lessen  the  incomes  of  capitalists 
who  are  supported  by  the  labor  of  others,  only  serve  to 
show  the  true  working  of  the  Safety  Fund  system ;  for 
its  object  is  to  furnish  a  standard  of  distribution  which 
will  cause  men  to  sustain  such  mutually  just  relations  as 
to  render  it  generally  necessary  for  all  to  render  an 
equivalent  in  useful  labor  for  the  labor  received  from 
others. 


CHAPTER  V. 

ADVANTAGES   OF   THE   SAFETY   FUND. 

THE  Safety  Fund  will  lend  money  at  a  low  rate  of 
interest  to  all  applicants  furnishing  the  requisite  landed 
security ;  hence  every  town,  county,  and  State,  which  has 
the  power  to  perform  the  necessary  labor,  can  make  inter- 
nal improvements  without  pledging  its  property  to  large 
cities  or  to  foreign  nations  to  borrow  money.  A  few 
years  since,  the  high  and  fluctuating  rates  of  interest  so 
depressed  the  prices  of  products,  that  a  number  of  the 
States  were  unable  to  pay  the  half-yearly  interest  due  on 
their  bonds  ;  consequently,  they  fell  to  a  very  low  price, 
and  many  of  the  holders  suffered  great  losses,  while  large 
capitalists  were  enabled  to  take  advantage  of  the  fall,  and 
to  buy  the  bonds,  in  some  instances,  at  less  than  one-fifth 
of  their  real  value.  The  canal  bonds  of  the  State  of  Illi- 
nois were  bought  at  from  sixteen  to  thirty  cents  on  the 
dollar.  A  short  time  after  this,  in  1845,  the  purchasers 
of  these  bonds  made  a  negotiation  with  the  State  to  fur- 
nish it  with  a  further  sum  of  money  to  complete  the 
canal,  on  condition  that  a  mortgage  should  be  given  to 
them  on  the  canal  and  adjacent  lands,  securing  the  money 
so  advanced,  and  also  securing,  the  par  value  of  the  bonds 
bought  at  these  reduced  rates,  and  the  interest.  It 
seemed  as  if  the  people  thought  this  money  would  actu- 
ally excavate  the  canal,  quarry  the  stone,  and  build  the 
locks.  But  when  they  had  received  the  money,  they 
were  obliged  to  build  the  canal  by  their  own  labor,  and 
now  that  it  is  completed,  to  collect  the  tolls  for  the  trans- 

80T 


308  A   TRUE   MONETARY   SYSTEM. 

portation  of  their  own  products,  and  from  all  the  mer- 
chandise passing  on  the  canal,  and  give  this  income  to 
the  foreign  and  other  holders  of  the  bonds  for  merely 
furnishing  a  representative  of  Illinois  property. 

If  the  Safety  Fund  had  been  established,  and  money 
had  been  issued  representing  the  property  of  the  people 
of  Illinois  at  an  interest  of  six  per  cent.,  their  property 
would  not  have  been  more  encumbered  than  by  being 
pledged  to  foreigners  at  the  same  rate  of  interest.  The 
property  that  secured  the  loan  to  foreigners  would  have 
been  good  security  to  the  Fund.  The  interest  on  the 
loan  would  have  been  gained  by  the  people  of  the  State, 
instead  of  being  paid  to  foreigners.  All  the  interest  that 
Illinois  pays  to  other  States  or  nations,  is  paid  for  the  use 
of  money,  and  not  for  the  use  of  actual  capital.  If  the 
people  of  Illinois  had  had  no  capital,  they  could  not  have 
borrowed  the  money ;  if  they  had  ample  capital,  they 
certainly  ought  to  have  had  the  power  to  obtain  a  proper 
representative  of  it  at  home,  instead  of  being  compelled 
to  go  abroad  for  it.  How  much  greater  would  have  been 
the  prosperity  of  this  State  had  the  Safety  Fund  been 
established  before  she  began  to  make  her  internal 
improvements.  The  necessary  money  to  carry  them 
through  without  delay  could  have  been  obtained  from 
the  Fund  at  one  and  one-tenth  per  cent,  interest,  and  no 
embarrassment  from  a  scarcity  of  money  would  have 
been  felt  in  any  department  of  industry.  The  improve- 
ments would  have  remained  in  her  own  hands,  and  she 
would  long  since  have  been  receiving  the  advantages  of 
them  in  tolls  and  increased  facilities  of  transportation. 
But  under  the  present  monetary  system,  she  has  suffered 
the  loss  of  credit,  and  to  complete  her  improvements  has 
been  compelled  to  mortgage  her  canal  and  canal  lands, 
and  the  labor  of  coming  generations. 

Millions  of  money  are  now  paid  in  interest  to  foreign 
nations  on  our  Government  and  State  debts.  Besides, 


ADVANTAGES   OF   THE   SAFETY   FUND.  309 

in  all  our  large  seaport  towns,  many  foreign  capitalists 
have  agencies  or  banking  houses  for  drawing  bills  of  ex- 
change, dealing  in  stocks,  discounting  notes  at  enormous 
rates,  etc.,  and  in  this  way  immense  fortunes  are  accumu- 
lated from  our  labor.  These  capitalists  exercise  a  great 
influence  upon  our  money  market.  When  our  people 
shall  have  an  ample  national  currency,  at  a  low  and  uni- 
form rate  of  interest,  these  capitalists  and  agents  will  dis- 
appear. Money-brokers  and  stock-jobbers,  who  now  live 
by  fluctuations  in  the  money  market,  will  abandon  an 
occupation  no  longer  profitable. 

The  value  of  money  being  made  uniform,  all  kinds  of 
stocks  will  maintain  a  uniform  value,  determined  by  the 
per  centage  interest  which  they  will  yield,  and  the  time 
they  have  to  run  before  the  payment  of  the  principal. 
If  they  bear  a  higher  rate  of  interest  than  the  legal  one, 
of  course  they  will  be  above  par.  All  the  State  stocks 
which  the  States  have  reserved  the  right  to  pay  before 
maturity,  will  be  paid  with  money  borrowed  at  one  and 
one-tenth  per  cent.  Even  if  the  bonds  of  some  of  the 
States  have  a  number  of  years  to  run,  these  States  cau 
much  more  easily  pay  five,  six,  or  seven  per  cent,  inter- 
est per  annum  upon  them  during  the  period,  than  they 
can  under  the  present  monetary  system,  because  the 
value  of  their  labor  and  products  will  be  increased.  The 
same  will  be  true  of  all  private  bonds  and  mortgages 
having  a  number  of  years  to  run.  A  few  years  will  ex- 
tinguish all  these  old  loans,  and  then  there  will  be  a 
nearly  uniform  rate  of  interest  on  all  obligations  through- 
out the  nation. 

From  what  was  said  in  the  Introduction,  it  appears  that 
the  farmer  or  planter  is  very  dependent  upon  the  mecha- 
nic for  his  implements  of  husbandry,  for  his  house,  furni- 
ture, books,  etc.,  etc.  The  mechanic  is  certainly  not  less 
dependent  on  the  farmer  for  the  materials  of  his  food  and 
clothing,  and  these  are  indispensable  to  his  existence. 


310  A   TRUE   MONETARY    SYSTEM. 

There  is  no  such  thing  as  independence  among  men ;  they 
are  and  must  be  helps  to  each  other.  Although  all  useful 
trades  and  occupations  are  mutually  beneficial  and  neces- 
sary, yet  in  most  nations  a  jealousy  exists  between  the 
agricultural  and  manufacturing  interests.  But  in  reality 
the  natural  tendency  of  the  prosperity  of  one  is  to  increase 
the  prosperity  of  the  other.  The  object  of  both  is  to 
supply  themselves  and  each  other  with  food,  clothing, 
and  the  other  comforts  of  life.  If  an  ample  supply 
of  money  were  at  ah"  times  in  circulation,  at  a  uniform 
and  sufficiently  low  rate  of  interest,  both  the  farmers 
and  the  mechanics  would  find  a  ready  market  for 
their  products ;  and  the  prices  of  their  products  would 
naturally  adjust  themselves  so  that  both  parties  would 
receive  an  equitable  share  of  the  proceeds  of  their 
labor.  Each  would  be  justly  contributing  to  the  welfare 
of  the  other,  and  each  would  be  benefited  by  the  labor 
of  the  other,  and  would  receive  an  equitable  proportion 
of  the  products,  because  the  representative  power  by 
which  the  distribution  was  made,  would  not  be  capable 
by  its  income  of  engrossing  the  products  of  either  party. 
But  so  long  as  the  income  power  is  the  all-absorbing 
power  which  takes  the  larger  portion  of  what  both 
these  parties  earn  by  their  labor,  a  third  party  that  holds 
this  legal  power  of  income,  will  take  without  labor  the 
larger  share  of  what  both  the  others  produce.  While 
the  poverty  of  producers  is  supposed  to  be  caused  by 
over  production,  and  the  sale  of  too  many  products,  the 
evil  will  be  attributed  to  laws  favoring  one  class  of  pro- 
ducers to  the  disadvantage  of  others.  But  when  the  real 
cause  of  the  oppression,  that  is,  the  monopolizing  power 
of  money  over  ah1  the  productions  of  labor  is  perceived 
and  rectified,  the  various  branches  of  productive  industry 
will  harmonize,  and  promote  one  another's  welfare. 

Some  may  not  understand  how  the  rate  of  interest  on 
money  affects  the  compensation  of  labor.     Suppose  the 


ADVANTAGES   OF   THE   SAFETY   FUND.  311 

owner  of  a  small  farm  is  now  obliged  to  work  early  and 
late  for  a  mere  subsistence.  He  has  little  or  no  means 
to  spare  for  the  education  of  his  children,  and  in  fact 
cannot  give  them  time  to  attend  school.  If  this  man 
should  be  told  that  the  high  rate  of  interest  at  which 
money  is  loaned  deprives  him  and  his  family  of  the  com- 
forts of  life  and  the  means  of  education,  he  would  very 
naturally  ask :  "  How  can  that  be  ?  I  never  borrow 
money  and  pay  interest,  nor  do  I  lend  money  and  re- 
ceive interest.  The  payment  of  a  high  rate  of  interest 
by  others  does  not  affect  me ;  it  does  not  dimmish  my 
crops.  I  raise  food  for  my  family,  and  the  produce  that 
I  can  spare  I  sell,  and  buy  such  other  articles  as  we 
need,  and  the  storekeeper  does  not  charge  me  any  inter- 
est. I  have  enough  to  do  to  live,  without  troubling 
myself  about  the  interest  on  money."  He  is  indeed 
aware  that  many  people  live  with  far  less  labor  than  he 
does,  and  have  many  more  comforts,  and  this  he  attri- 
butes to  their  good  fortune.  He  does  not  grasp  the  sub- 
ject sufficiently  to  perceive  that  the  interest  on  money 
is  a  standard  or  governing  power,  which  compels  him  to 
contribute  his  proportion  of  the  products  required  to 
support  all  the  non-producers  in  this  country,  and  pro- 
bably some  of  the  capitalists  of  Europe.  He  does  not 
see  that  a  large  per  cent,  is  taken  from  the  price  of  his 
products  by  the  purchaser,  in  order  to  enable  the  latter 
to  pay  his  interest  and  live  by  the  purchase  and  sale ; 
and  that,  for  the  same  reason,  when  he  purchases,  a 
large  per  cent,  is  added  to  the  price  of  every  article  pro- 
duced by  the  labor  of  others.  This  difference  in  price 
must  be  sufficient  to  support  all  who  live  upon  income 
without  labor. 

Let  the  Safety  Fund  be  established,  and  interest  be 
reduced  to  one  and  one-tenth  per  cent.,  and  after  a  year 
or  two  let  inquiry  be  made  of  the  same  farmer  about  his 
welfare.  He  would  probably  say,  "  I  am  doing  very 


312  A   TRUE   MONETARY   SYSTEM. 

well ;  I  am  much  better  off  than  I  was  two  or  three 
years  ago.  I  send  my  children  to  school,  and  have  a 
good  living."  Should  he  be  told  that  his  prosperity  was 
owing  to  a  sound  currency  and  low  rate  of  interest,  he 
might  say :  "  I  do  not  borrow  any  money  from  the  Safety 
Fund,  and  I  have  no  money  to  lend  upon  interest.  I 
raise  corn  and  potatoes  as  formerly,  and  sell  them  to  the 
same  merchants.  I  do  not  see  how  the  reduction  of  the 
interest  on  money  that  other  people  borrow  is  any  bene- 
fit to  me."  Although  he  do  not  perceive  the  causes  of 
his  past  privations  or  of  his  present  comforts,  he  will  be 
as  sensible  as  any  one  of  the  improvements  in  his  condi- 
tion. If  a  man  suffering  intense  pain  were  informed 
that  it  was  caused  by  the  disorder  of  a  nerve,  he  might 
not  understand  this,  nor  think  so  small  a  cause  could 
occasion  such  acute  suffering.  Apply  the  proper  remedy, 
let  the  nerve  recover  its  tone,  and  the  pain  cease,  and 
he  would  be  conscious  of  health,  although  he  might  not 
understand  how  the  pain  was  removed.  Whether  a  man 
understand  the  laws  relating  to  his  physical  system  or 
not,  he  will  suffer  if  any  organ  do  not  perform  its  duty ; 
and  whether  laborers  understand  the  constitution  of 
money  or  not,  they  must  suffer  all  the  consequences  of 
its  imperfect  or  deranged  organization. 

There  will  doubtless  be  a  class  of  objectors  to  the 
Safety  Fund  who  will  contend  that  it  is  by  the  use  of 
greater  talents,  and  not  by  the  unjust  power  of  money, 
that  a  few  gain  the  majority  of  the  wealth  in  a  nation. 
But  it  is  evident,  that  if  the  greater  talents  of  the  few 
are  not  dependent  upon  the  unjust  power  of  money  and 
the  love  of  gain  by  its  exorbitant  rate  per  cent,  interest, 
that  diminishing  the  power  of  money  and  greatly  lower- 
ing the  rate  per  cent,  interest,  cannot  in  the  least  infringe 
upon  the  full  and  freest  use  of  their  greater  talents, 
either  for  the  production  or  the  acquisition  of  wealth,  or 
for  any  other  just  and  lawful  purpose. 


ADVANTAGES   OF   THE   SAFETY   FUND.  313 

When  the  natural  reward  of  labor  is  secured  to  the 
laborer,  poverty  cannot  exist  in  any  family  whose  mem- 
bers are  able  and  willing  to  work.  And  those  who  can 
so  easily  provide  for  their  own  wants,  will  cheerfully  con- 
tribute to  the  support  of  the  sick  and  needy.  They  will 
be  able  to  supply  themselves  amply  with  the  comforts  of 
life,  and  have  an  abundance  of  time  for  intellectual  and 
moral  culture.  The  incentives  to  vice  will  be  compara- 
tively few.  Avarice  first  arises  from  the  fear  of  want ; 
to  remove  want  will  therefore  in  a  great  measure  re- 
move this  vice,  and  the  unnumbered  evils  which  are  its 
attendants.*  It  is  frequently  said  that  the  people  must 
reform,  and  that  not  until  then  may  we  hope  for  good 
laws.  Not  so  :  we  might  as  well  expect  families  to  grow 
up  virtuous  where  the  parents  are  cruel,  profligate,  and 
vicious,  as  to  expect  nations  to  be  virtuous  under  op- 
pressive laws.  Make  the  laws  a  standard  of  right,  and 
their  benefits  must  secure  an  improvement  in  the  morals 
of  the  people. 

It  is  often  said  that  men  are  naturally  lazy,  and  will 
not  labor  unless  compelled  by  an  urgent  necessity ;  and 
it  may  be  objected  to  the  Safety  Fund  that  if  laborers 
are  supplied  with  all  the  necessaries  and  comforts  of  life 
with  far  less  labor  than  at  present,  the  effect  will  be  to 
induce  indolence.  This  opinion  is  held  mainly  by  men 
who  have  accumulated  large  properties,  and  by  those 
who  have  been  placed  in  easy  circumstances  by  their 
ancestors,  and  who,  under  the  present  system  have  the 
power  to  impose  the  necessity  to  labor.  This  class  seem 
to  think  it  their  right,  if  not  their  duty,  to  take  all  the 
surplus  earnings  from  laborers,  that  the  latter  may  be 
kept  at  work.  If  it  be  true  that  man  is  naturally  indo- 
lent, it  will  be  difficult  to  show  any  good  reason  for  com- 
pelling the  larger  part  of  the  race  to  labor  excessively  to 

*  See  Appendix,  K. 
14 


314  A   TRUE   MONETARY   SYSTEM. 

keep  from  starvation,  while  the  greater  and  better  por- 
tion of  their  productions  is  applied  to  support  a  smaller 
class  without  labor.  There  are  those,  however,  who  be- 
lieve that  man  is  naturally  industrious.  They  know  that 
healthy  children  are  continually  active,  and  that  when 
motives  of  comfort  or  pleasure  are  offered,  they  are  ever 
ready  to  make  great  exertions  to  possess  themselves  of 
the  desired  objects.  Hence  they  believe  that  if  the  pro- 
ductions of  labor  were  fairly  awarded  to  the  producers, 
the  prospect  of  the  comfort  and  elevation  in  store  for  the 
industrious,  would  present  sufficient  motives  to  secure 
all  necessary  and  desirable  exertion.  This  certainly  is 
true  unless  the  natures  of  the  child  and  the  man  are  radi- 
cally different.  But  if,  when  a  child  had  made  great 
exertions  to  obtain  some  desired  object,  others  should 
by  a  secret  or  visible  power  prevent  his  receiving  three- 
fourths  of  his  well-earned  reward,  and  the  same  exertions 
should  be  repeatedly  followed  by  the  same  results, 
doubtless  he  would  be  discouraged  from  further  at- 
tempts. If  under  these  circumstances  he  should  become 
idle,  or  seek  to  acquire  without  labor,  it  ought  not  to  be 
attributed  to  natural  indolence,  but  to  the  want  of  a 
reasonable  assurance  that  his  labor  would  be  successful. 
The  situation  in  which  the  producing  classes  of  all 
nations  are  placed,  seems  analogous  to  that  of  the  disap- 
pointed child.  It  has  hence  become  a  very  common 
remark  that  man  is  naturally  indolent.  If  discourage- 
ments were  perceived  by  the  minds  of  children  equal  to 
those  familiar  to  the  laboring  classes,  they  would  be  so 
disheartened  in  their  efforts  as  apparently  to  change 
their  natures,  and  we  should  then  have  lazy  children. 
Their  efforts  also  would  depend  on  necessity  ;  and  men 
and  children  would  be  found  to  have  the  same  natures, 
and  to  be  governed  by  similar  motives.* 

«  See  Appendix,  L. 


ADVANTAGES    OF  THE   SAFETY    FUND.  315 

As  a  further  illustration  of  the  foregoing  principle,  we 
may  notice  briefly  the  policy  which  our  Government 
should  pursue  in  the  sale  of  the  public  lands.  Tf  a  country 
is  to  become  wealthy,  facilities  must  be  afforded  to  those 
who  perform  the  labor  necessary  to  make  it  rich.  It  is 
generally  admitted  that  a  free  people  will  perform  more 
labor,  and  make  greater  production  than  an  equal  num- 
ber of  slaves.  This  seems  to  prove  that  those  who  expect 
to  own  and  enjoy  the  proceeds  of  their  labor  will  pro- 
duce more  than  those  who  are  stinted  in  the  necessaries  of 
life  by  having  their  products  appropriated  to  the  use  of 
others.  When  large  estates  are  rented,  and  the  land- 
lords take  a  great  share  of  the  earnings  of  their  tenants, 
the  farms  are  not  generally  as  well  cultivated,  and  the 
buildings  and  other  improvements  are  seldom  if  ever  as 
good  as  where  the  farmers  are  the  owners  of  the  soil 
which  they  cultivate.  The  difference  is  doubtless  owing 
to  the  hopelessness  in  one  case  that  even  by  severe  toil 
they  shall  materially  improve  their  condition,  and  to 
the  prospect  in  the  other  of  enjoying  the  fruits  of  their 
labor.  To  the  former  labor  is  a  burden,  while  the  latter 
cheerfully  perform  a  greater  amount.  If  then  our  Gov 
ernment  desires  the  improvement  of  the  public  lands, 
encouragement  must  be  offered  to  those  who  will  pur- 
chase and  cultivate  them.  Speculators  who  buy  and  sell 
them  at  a  tenfold  profit,  and  make  no  improvements  on 
the  lands,  add  nothing  to  the  wealth  of  the  country ;  but 
purchasers  who  go  upon  the  land  and  improve  it  by  their 
labor,  increase  the  public  wealth.  Let  then  the  Government 
sell  the  lands  to  actual  settlers  only,  in  parcels  not  exceed- 
ing half  a  section  to  any  individual.  Let  a  small  part  of 
the  purchase  money  be  paid  down,  and  let  the  balance 
remain  on  mortgage  at  one  and  one-tenth  per  cent,  inter- 
est until  the  occupant  is  disposed  to  pay  it.  In  this  way 
the  land  will  at  once  bring  an  income  to  the  Government 
as  good  as  if  the  whole  purchase  money  were  paid  and 


316  A   TRUE   MOXETAEY   SYSTEM. 

reloaned  at  the  legal  rate  of  interest.  The  Government 
will  be  perfectly  safe,  and  the  people  will  pay  for  and 
improve  the  lands.  This  will  at  the  same  time  build  up 
a  prosperous  and  happy  people,  who  will  soon  add  im- 
mensely to  the  wealth  of  the  nation,  and  who,  in  improv- 
ing their  own  condition,  will  contribute  to  the  comfort 
and  happiness  of  others  by  supplying  them  with  food, 
and  receiving  their  surplus  products  in  return. 

If  the  laws  be  such  that  the  people  can  secure  a  good 
living  and  a  handsome  surplus  without  labor,  and  can  earn 
only  a  scanty  subsistence  and  no  surplus  by  it,  they  will 
seek  to  exempt  themselves  from  labor.  But  if  the  laws 
be  made  such  that  labor  will  secure  to  them  a  good  living 
and  a  handsome  yearly  surplus,  while  without  it  they  can 
obtain  only  a  poor  living  and  no  surplus,  people  will 
incline  to  labor.  If  interest  be  reduced  to  a  just  rate, 
almost  the  entire  population  of  the  country  will  be  en- 
gaged in  some  species  of  productive  industry,  and  the 
laboring  classes  will  be  relieved  from  the  support  of 
a  numerous  body  who  now  live  by  their  wits — that  is, 
by  contriving  to  obtain  the  products  of  others  without 
toil.  When  money  is  made  a  just  standard,  the  injustice 
of  contracts  founded  upon  it  will  cease,  and  many  laws 
necessary  to  support  the  present  unjust  standard  will  dis- 
appear. 

So  long  as  monetary  laws  continue  a  standard  that 
will  wrest  products  from  producers,  and  place  and  pro- 
tect them  in  the  hands  of  non-producers,  they  will  require 
for  their  support  the  aid  of  the  sword  and  bayonet,  be- 
cause man's  natural  sense  of  right  revolts  against  the 
usurpation  and  the  injustice  of  such  protection.  But 
when  monetary  laws  shall  sustain  a  just  standard  of  value, 
which  will  place  and  protect  products  in  the  hands  of 
their  producers,  they  will  of  course  conform  to  the  natu- 
ral laws  of  production,  which  were  ordained  by  a  higher 
than  human  power.  The  distribution  then  being  accord- 


ADVANTAGES   OF   THE   SAFETY   FUND.  317 

ing  to  justice  strife  will  cease,  because  a  man  having  his 
own  rights  respected  and  protected,  will  naturally  respect 
and  protect  the  rights  of  others.  The  time  is  not  far  dis- 
tant when  this  truth  will  be  known  and  appreciated  by 
all  civilized  nations,  and  the  mistaken  power  of  legal 
Might  which  has  such  dominion  over  man,  will  wither 
before  the  meek  and  peaceable  power  of  Right  that  exists 
in  the  natural  laws  of  a  wise  and  beneficent  Creator. 


CONCLUSION". 

IN  the  previous  pages  we  have  discussed  the  rights  of 
labor  and  capital  for  the  sole  purpose  of  convincing  the 
public  that  the  rapid  increase  of  capital  by  per  centage, 
now  favored  by  monetary  laws,  while  it  stimulates  the 
enterprise  of  the  few,  and  naturally  and  inevitably 
secures  to  them  great  wealth,  represses  and  cripples  the 
enterprise  of  the  great  mass  of  the  people,  tending  to  pau- 
perism, crime,  and  indirectly,  but  certainly,  to  the  over- 
throw of  the  Government,  which,  disregarding  the  ratio 
of  the  actual  increase  of  property  by  labor,  has  given  the 
preference  to  capital :  that  justice  to  labor,  while  it.will 
secure  individual  comfort  and  happiness  to  all  who  are 
able  and  willing  to  work,  will  rapidly  develop  the  highest 
qualities  of  our  nature,  and  all  the  resources  of  our  coun- 
try, and  greatly  increase  the  national  wealth ;  that  it  will 
give  to  civilization  an  impetus  such  as  the  world  has 
never  seen,  and  relieve  it  from  one  of  its  hardest  condi- 
tions, that  of  creating  desires  and  necessities  which  it  pro- 
vides no  means  to  gratify ;  that  it  will  silence  at  once 
and  forever  the  doubt  so  often  felt  and  spoken,  whether 
the  happiness  of  the  mass  of  men  has  been  promoted  by 
the  change  from  the  savage  to  the  civilized  state. 

It  has  been  shown  that  labor  constitutes  the  real  trea- 
sure of  a  nation,  and  without  claiming  for  it  anything 
more  than  its  natural  rights,  we  insist  that  these  should 
be  guarded  by  the  most  jealous  care  of  government.  It 
has  also  been  shown  that  under  existing  monetary  laws, 
labor  is  not  and  cannot  be  properly  rewarded.  Change 
is  indispensable,  and  fortunately  it  can  be  effected  with- 
out altering  the  Constitution  of  the  United  States,  with- 


CONCLUSION.  319 

out  the  slightest  disturbance  to  the  present  institutions 
of  society,  or  real  injury  to  any  one. 

It  is  now  for  the  American  people,  who  have  founded 
their  government  upon  the  principles  of  equality  and  free- 
dom, to  establish  the  rights  of  labor,  which  have  been 
nearly  disregarded  in  all  previous  time,  and  only  cared  for 
as  they  have  served  to  minister  to  the  ambition  and  luxury 
of  courts  and  nobles.  Let  the  social  position  of  the 
laborer,  to  which  he  is  entitled  by  the  ordination  of  God 
in  the  laws  of  nature,  be  ascertained  and  recognized, 
and  poverty,  crime,  and  most  other  political  and  social 
evils,  will  give  place  to  competency,  virtue  and  happi- 
ness. 

The  facts  contained  in  this  volume  show  plainly  that 
our  monetary  system  favors  the  rapid  concentration  of 
capital  in  opposition  to  the  rights  of  labor,  and  we  deem 
it  waiTantable  to  assume,  that  nearly  all  who  shall  care- 
fully examine  the  subject,  will  be  convinced  that  our 
present  laws  of  distribution  are  continually  doing  a  great 
wrong  to  the  people. 

Nothing  more  simple  than  the  Safety  Fund  need  be 
desired,  and  the  more  it  is  considered,  the  more  adequate 
it  will  appear  to  distribute  the  wealth  to  those  whose 
labor  earns  it.  This  system  will  as  certainly  reward 
labor,  as  the  one  now  in  force  has  oppressed  it.  It  will 
infringe  no  rights  of  property.  The  owners  of  wealth 
will  continue  in  undisturbed  possession.  They  will  be 
able  to  lend  their  money  and  rent  their  property  as 
readily  at  one  and  one-tenth  i>er  cent,  as  now  at  six  or 
seven  per  cent.  The  dollar  received  by  the  rich  man  in 
interest  or  rent  will  purchase  as  much  as  the  dollar 
earned  by  the  laborer  ;  precisely  as  at  the  present  rates 
of  interest.  Landowners  will  be  at  liberty  to  rent  their 
land  to  tenants,  work  it  themselves,  or  leave  it  untilled, 
according  to  their  own  pleasure  :  the  low  rate  of  interest 
will  not  prevent  it  from  yielding  crops.  Capitalists  will 


320  CONCLUSION. 

not  be  required  to  favor  laborers,  nor  to  give  them  em- 
ployment, nor  to  diminish  the  hours  of  toil.  Capitalists 
and  laborers  will  be  free  to  make  their  own  agreements 
on  these  points.  The  Safety  Fund  contemplates  no 
agrarian  distribution.  It  asks  for  no  distribution  of  lands 
and  property,  and  for  no  contributions  of  money  by 
either  the  Government  or  individuals  to  the  support  of 
laborers.  Laborers  will  need  no  favors.  They  only  re- 
quire that  the  Government  establish  a  just  standard  of 
value,  which  will  allow  them  to  possess  an  equitable 
share  of  the  fruits  of  their  labor.* 

Who  are  those  directly  interested  in  the  adoption  of 
the  Safety  Fund?  All  agriculturists,  manufacturers, 
mechanics,  planters,  in  short,  all  who  wish  to  earn  a 
support  by  honest  industry.  Merchants  will  do  a  safe 
business  in  exchanging  products,  and  their  profits  will  be 
moderate  and  sure.  Nine-tenths  of  our  whole  population 
will  receive  the  pecuniary 'benefit  which  is  justly  their 
due,  and  the  remaining  one-tenth  will  be  left  in  undis- 
turbed possession  of  their  present  wealth,  and  like  their 
fellow-citizens,  at  liberty  to  increase  it  by  any  useful 
employment.  The  desire  of  capitalists  to  accumulate  is 
often  owing  to  the  wish  to  leave  large  fortunes  to  their 
children.  But  if  they  rightly  consider  the  instability  of 
wealth,  they  cannot  expect  all,  or  even  one-fourth  of  their 
posterity  to  remain  rich.  Will  it  not  be,  to  reasonable 
men,  a  thousand  times  more  consoling  to  leave  such  laws 
as  with  a  moderate  amount  of  labor  will  secure  to  their 
whole  posterity  the  comforts  of  life  and  the  means  of 
education,  than  to  leave  to  their  children  the  money  and 
the  present  monetary  laws,  which  must  in  a  few  years 
compel  the  larger  part  to  toil  incessantly  for  a  scanty 
subsistence,  and  deprive  them  of  mental  and  social  culture? 
Are  not  just  laws  a  far  greater  blessing  to  transmit  than 
any  amount  of  wealth  ?  We  believe  that  many  among 
*  See  Appendix,  M. 


CONCLUSION.  321 

the  rich,  perceiving  the  justice  and  beneficence  of  this 
system,  will  be  found  among  its  most  ardent  supporters. 
In  all  civilized  nations  much  attention  is  now  directed 
to  the  enormous  evils  of  society ;  and  thousands,  yes,  we 
may  say,  millions  of  good  and  benevolent  men  are  en- 
deavoring to  do  something  for  their  removal.  But 
there  is  a  great  variety  of  evils,  and  a  corresponding 
variety  of  opinions  as  to  the  means  to  be  used  to  accom- 
plish the  desired  objects  j  hence  reformers  split  into 
numerous  societies ;  and  one  society  combats  drunkenness, 
another  slavery,  another  land  monopoly  and  the  oppres- 
sion of  labor,  another  war.  These  are  admitted  to  be 
great  evils,  and  all  who  are  truly  desirous  of  their 
removal  are  the  good  men  of  the  age ;  because  they  are 
striving  to  alleviate  the  sufferings  of  mankind,  and  to 
improve  the  moral  character  and  condition  of  society. 
Yet  their  work  will  only  serve  partially  to  modify  these 
evils,  and  will  never  eradicate  them,  because  they  are 
working  not  at  the  cause  but  at  the  effects.  To  remedy 
the  wrongs  they  must  begin  at  the  foundation  which 
supports  them,  and  make  that  just  and  right,  and  then 
the  evils  will  be  easily  removed ;  as  a  good  house  may 
be  easily  erected  on  a  good  foundation,  but  on  a  bad  one, 
the  people  might  always  work  at  the  effects  produced  by 
it  on  the  work  above,  and  the  most  that  could  be  done 
would  not  prevent  its  being  a  rickety,  poor  building ; 
while  the  same  labor  on  a  good  foundation  would  have  built 
up  a  splendid  edifice.  And  had  the  foundation  of  con- 
tracts been  just,  the  labor  performed  during  past  ages 
would  not  only  have  provided  amply  for  the  physical 
wants  of  the  race,  but  would  have  supplied  the  best 
means  for  their  moral  and  intellectual  culture.  The  root 
of  a  tree  produces  a  trunk ;  the  trunk  naturally  divides 
itself  into  branches,  which  subdivide  themselves  into 
thousands  of  smaller  branches  and  little  twigs.  All  these 
14* 


322  CONCLUSION. 

are  supported  by  the  root  and  trunk.  If  we  girdle  one 
of  these  little  twigs,  it  will  die  off  above ;  but  will  be 
likely  to  sprout  out  below.  A  large  branch  cut  off  will 
die,  and  in  dying  will  impart  new  vigor  to  the  other 
branches ;  but  killing  the  root  will  destroy  the  tree.  So 
with  the  evils  of  society,  most  of  them  spring  from  one 
root,  and  they  have  become  a  great  tree.  The  trunk 
divides  itself  into  many  branches,  which  subdivide  into 
many  other  branches,  and  little  twigs.  Girdling  this 
twig,  or  this  or  that  branch,  will  never  destroy  the  evil ; 
but  kill  the  root,  and  then  these  large,  and  thousands  of 
smaller  branches  and  twigs  will  wither,  decay  and  drop 
off,  and  the  trunk  will  die.  We  desire  to  call  the 
attention  of  philanthropists  of  every  nation,  clime,  and 
sect,  to  the  great,  hidden  evil  which  lies  at  the  root 
and  below  the  surface,  that  they  may  combine  their 
strength,  and  by  one  joint  effort  directed  at  the  root, 
slay  the  thousand  great  sins  of  a  nation,  so  that  they 
will  at  once  begin  to  wither  and  decay,  like  the 
branches  and  twigs  of  a  tree  killed  at  the  root.  If  the 
philanthropists  who  are  now  engaged  in  their  works  of 
kindness,  and  the  producing  classes  who  so  wrongfully 
suffer  by  the  present  system,  would  but  use  their  united 
efforts  to  have  a  just  currency  substituted  for  the  present 
unjust  one,  it  would  be  speedily  accomplished ;  and  the 
consequent  moral  and  physical  improvement  would  be 
without  a  parallel  in  the  history  of  man.  When  any 
nation  shall  adopt  a  just  monetary  system,  the  abundant 
supply  of  comforts,  and  the  good  will,  peace  and  happi- 
ness which  will  ensue,  will  form  such  a  contrast  to  the 
present  condition  of  society  as  to  astonish  the  world ; 
and  all  will  wonder  that  the  power. of  money  was 
adequate  to  the  production  of  so  much  evil.  By  the 
unjust  power  of  money  tyrannies  have  been  built  up  and 
sustained,  and  by  making  it  a  just  standard  of  value,  and 


CONCLUSION.  323 

an  equitable  balance  against  actual  production,  it  will 
again  demolish  them,  giving  to  man  his  rights  throughout 
the  civilized  world.* 

The  means  necessary  to  put  in  operation  and  sustain 
the  Safety  Fund  are  not  confined  to  the  few  capitalists 
who  now  control  the  currency,  and  furnish  the  Govern- 
ment and  the  people  with  money.  Our  farmers  and 
mechanics  alone  have  sufficient  landed  estate  to  secure 
several  times  the  amount  of  money  necessary  for  our 
currency.  The  only  thing  required  is  a  law  of  Congress 
adopting  this  system.  The  passage  of  this  law  must  be 
effected  by  direct  petition,  and  by  making  the  measure  a 
leading  question,  the  people  voting  only  for  men  who  will 
use  their  influence  in  favor  of  it.  Every  one,  thoroughly 
convinced  of  the  truth  of  the  positions  taken  in  this  book, 
can  do  something  to  diffuse  a  knowledge  of  them  among 
his  friends  and  neighbors.  The  most  effectual  way  to  ex- 
cite interest  in  the  system,  and  give  it  prominence,  would 
be  to  call  public  meetings  and  lecture  upon  the  subject. 
The  objects  which  will  be  secured  by  its  establishment,  are 
so  evidently  in  accordance  with  the  principles  and  aims  of 
the  Christian  religion,  that  ministers  of  the  Gospel  cannot 
fail  to  advocate  it  with*  the  same  zeal  that  they  advocate 
peace,  justice,  and  good-will  among  men  ;  nor  can  states- 
men who  legislate  for  the  well-being  of  their  countrymen, 
refuse  it  their  support.  The  public  newspapers  have 

*  If  we  could  put  an  end  to  its  unjust  use  there  is  no  danger 
of  our  Government  ever  becoming  a  monarchy,  the  predictions  of 
Europe  to  the  contrary  notwithstanding.  But  should  the  interest  on 
money  be  regulated  by  our  Government,  at  just  and  equal  rates, 
there  would  be  a  Union  in  this  country  stronger  than  any  govern- 
ment ever  yet  established,  and,  instead  of  our  becoming  a  monarchy, 
the  governments  of  Europe  would  be  obliged  to  adopt  our  form  of 
government,  or  very  much  better  their  own,  for  I  am  persuaded  that 
this  oppression  of  the  people  who  earn  the  wealth  of  nations  by  their 
industry  must,  from  its  severity,  cease. — Currency  the  Evil  and  the 
Remedy. 


324  CONCLUSION. 

great  power  to  awaken  the  attention  of  the  people,  and 
to  disseminate  a  knowledge  of  this  New  Monetary  Sys- 
tem, and  their  aid  would  greatly  hasten  its  adoption. 
But  more  than  all,  let  farmers,  mechanics,  and  all  men 
who  earn  their  living  by  labor,  determine  that  Congress 
shall  legislate  so  as  to  do  them  justice. 


APPENDIX. 


A.— Page  65. 

A  RAILEOAD  stock  that  brings  in  an  income  of  six  per  cent, 
per  annum  is  certainly  worth  only  one-half  as  much  as  one 
that  brings  in  twelve  per  cent.  If  the  income  of  the  one  that 
brings  in  six  per  cent,  could  be  let  for  six  per  cent,  only  after  it 
was  received,  and  the  one  that  brings  in  twelve  per  cent,  could 
be  let  at  twelve,  the  stock  bringing  the  latter  price  would  be 
worth  vastly  more  than  double  the  one  that  brings  but  six  per 
cent,  per  annum.  But  suppose  one  of  these  stocks  should  bring 
in  one  year  six  per  cent.,  the  next  eighteen,  the  next  five,  the 
next  twenty-four,  the  next  seven,  the  next  four,  and  the 
next  seventeen  per  cent,  and  each  year  the  income  uncertain, 
no  one  would  pretend  to  say  there  was  a  fixed  value  to  this 
stock,  or  that  it  would  be  a  just  measure  of  value,  although 
they  now  say  of  the  dollar,  that  it  is  a  dollar  all  the  world  over 
and  its  value  is  always  the  same.  They  might  as  justly  assert 
of  this  railroad  stock,  that  stock  is  stock  all  the  world  over, 
and  always  of  the  same  value.  But,  if  the  income  on  this 
stock  were  precisely  the  same,  not  only  every  year  but  every 
day  in  each  year,  and  would  continue  so  without  fluctuation, 
other  things  might  vary,  but  the  stock  would  always  be  of 
uniform  value.  And  especially  if  it  were  made  the  standard  by 
which  every  other  species  of  property  were  valued,  it  being  the 
foundation  of  all  value  and  always  producing  the  same  income 
—  stock  producing  stock  as  money  at  interest  produces 
money,  the  thing  produced  being  precisely  like  the  thing  that 
produced  it,  the  stock  could  not  possibly  vary  in  value.  Sup- 
pose a  man  to  have  one  hundred  shares  of  this  stock,  which 
was  yearly  producing  six  dollars  on  each  share  (amounting  to 


326  APPENDIX. 

$600),  the  interest  or  dividend  (|300)  being  paid  every  six 
months,  should  the  stock  and  road  cease  to  exist,  but  the  divi- 
dend be  regularly  paid,  the  non-existence  of  the  road  and  stock 
would  in  no  manner  affect  its  value.  But  let  the  dividend  or 
interest  cease  to  be  paid,  and  forever  cease,  and  the  road  con- 
tinue, the  stock  would  not  be  worth  one  cent.  Should  a  farm 
cease  to  produce,  it  would  be  worthless  for  agriculture;  so, 
should  the  interest  on  money  forever  cease,  I  doubt  whether  any 
nation,  with  all  the  laws  it  might  make,  could  ever  maintain  it 
as  a  currency.  Therefore,  money  loaned  should  bear  an  interest 
fixed  at  such  rates  as  never  to  be  oppressive.  We  might  better 
vary  the  length  of  the  yard  than  the  interest  on  money — better 
allow  all  the  other  measures  to  vary  than  this,  because  it  mea- 
sures the  value  of  every  species  of  property,  all  government 
expenses,  all  official  salaries,  and  everything  that  is  sold  by  the 
piece,  bulk,  or  quantity.  How  important  is  it  then  that  it 
should  be  just !  A  man  might  as  well  be  allowed  to  change  his 
neighbor's  landmark  as  to  increase  the  interest  on  his  debtor : 
he  would  as  much  augment  the  debt,  to  the  injury  of  his  debtor, 
as  he  would  enlarge  his  farm  to  the  loss  of  his  neighbor.  If  the 
one  is  just,  the  other  must  be  so  too. 

Congress  has  coined  money,  but  has  not  determined  its  value 
because  it  has  left  its  use  or  interest  unsettled.  It  might  as  well 
have  said  that  yard-sticks  should  contain  thirty  cubic  inches  and 
allow  them  to  be  made  to  slide  out  to  any  length  from  two  to 
fifteen  feet,  and  then  permit  a  few  people  to  monopolize  them  ; 
when  buying,  to  slide  out  the  stick  to  any  length,  and  when 
selling,  to  reduce  it  two  or  three  feet  and  call  the  length  of  the 
stick  a  yard,  however  long  or  short  it  might  be.  It  would 
no  more  vary  the  yard  when  its  length  was  increased  from 
three  to  fifteen  feet  than  the  dollar  is  changed  when  the  interest 
is  altered  from  six  per  cent,  per  annum  to  thirty  per  cent,  or 
two  and  a  half  per  cent  a  month.  (Currency,  the  Etil  and  the 
Semedy.) 

B.—Page  154. 

I  think  none  will  deny  that  labor  earns  the  wealth  of  all 
nations ;  yet  the  laboring  classes  often  suffer  for  the  necessaries 
of  life,  and  are  in  distress  for  the  want  of  employment.  For 


APPENDIX.  327 

example :  take  England,  the  wealthiest  nation  in  the  world,  and 
contemplate  the  state  of  the  laborer.  Instead  of  receiving  an 
equivalent  for  his  labor,  he  is  clothed  in  rags,  lives  on  scanty, 
miserable  food,  and  many  times  finds  great  difficulty  in  keeping 
himself  from  starving.  The  manufacturer  who  employs 
hundreds  of  these  laborers  finds  his  goods,  when  manufactured, 
sell  below  their  cost,  because  the  interest  on  money  is  raised. 
He  naturally  endeavors  to  lessen  his  expenses,  and,  cotton 
having  fallen,  buys  his  materials  a  little  cheaper.  Though  he 
very  much  dislikes  to  reduce  the  wages  of  his  workmen,  and 
continues  for  a  time  to  pay  the  same  price,  his  losses  compel 
him  to  diminish  them  one-eighth.  The  manufacturer,  still 
losing,  buys  cotton  a  little  lower,  and  takes  another  eighth  from 
the  wages  of  his  workmen,  which  distresses  them  very  much. 
Goods  fall  again,  and  he  is  obliged  to  give  the  men  employment 
half  the  time  only  at  this  low  price.  He  would  certainly  stop 
his  factory,  but  he  knows  the  workmen  would  suffer  still  more 
should  he  do  so ;  at  last  his  losses  compel  him  to  do  it ;  the 
laborers  are  thrown  out  of  employment  and  cannot  get  sufficient 
food  to  eat.  The  manufacturer  cannot  feed  them ;  for  a  long 
time  he  has  been  losing  on  the  goods,  his  business  is  stopped, 
and  he  is  earning  nothing.  He  feels  for  his  workmen,  but 
cannot  help  them ;  the  market  is  glutted  with  goods,  and  they 
will  not  sell.  The  fault  of  this  change  in  the  price  of  goods 
may  not  be  in  the  least  owing  to  the  manufacturer.  It  lies  be- 
yond all  the  useful  business  of  the  nation — in  the  money  capital. 
If  the  interest  of  money  rise  from  three  per  cent,  per  annum 
to  four  per  cent.,  it  is  equal  to  a  change  or  fall  in  the  goods  of 
twenty -five  per  cent.;  the  measure  is  just  one  quarter  more 
than  it  was.  The  income  of  one  hundred  dollars  in  a  year  is 
four  dollars  instead  of  three,  hence  a  person  buying  its  use  has 
to  pay  four  dollars  where  before  he  paid  but  three.  The  it*e  is 
all  the  person  buys  ;  he  rents  the  money  as  he  would  rent  any 
other  property — the  money  belongs  to  the  party  lending  or  rent- 
ing out  its  use,  and,  at  a  given  period,  is  to  be  returned  to  its 
owner,  its  v&e  only  being  paid  for.  But  if  the  interest  have 
risen  from  three  to  four  dollars,  the  dollar  itself  is  worth  one 
hundred  thirty-three  and  a  third  cents,  and  as  well  worth  that 
as  it  was  before  worth  one  hundred  cents.  It  is  the  same  to  the 
manufacturer  as  if  he  should  be  compelled  when  he  sells  his 


328  APPENDIX. 

goods,  to  increase  the  length  of  his  yard-stick  to  four  feet  and 
sell  his  goods  at  the  same  price  he  did  when  his  yard-stick  was 
hnt  three  feet  long.  He  cannot  do  this  unless  his  workmen  will 
make  four  yards  of  cloth  at  the  same  rate  that  they  before  made 
three ;  he  must  also  buy  as  much  cotton  now  for  three  dollars 
as  formerly  for  four,  and  curtail  every  other  expense  in  the  same 
proportion,  or  his  business  will  not  be  as  good  as  when  money 
was  at  three  per  cent,  interest.  The  interest  on  money  con- 
tinues to  rise  until  it  gets  to  five  per  cent,  per  annum  ;  now  his 
yard-stick  must  be  five  feet  long  and  his  workmen  must  make 
five  yards  of  cloth  for  the  same  same  price  they  before  made 
three.  Where  the  manufacturer  bought  a  bale  of  cotton  at  fifty 
dollars,  he  must  now  pay  but  thirty  and  diminish  every  other 
expense  in  proportion.  The  interest  on  money  still  increases  to 
six  per  cent,  per  annum,  and  the  use  of  a  dollar  having  doubled, 
the  dollar  itself  is  just  doubled  in  value.  Now  his  yard-stick 
must  be  six  feet  long  and  his  workmen  make  two  yards  of  cloth 
for  the  same  price  they  before  made  one :  he  must  buy  a  bale 
of  cotton  for  twenty -five  instead  of  fifty  dollars,  and  lessen  all 
other  expenses  in  proportion.  Add  to  this,  he  is  in  debt  when 
the  change  in  the  interest  takes  place,  although  the  debt  against 
him  is  permanent  and  bears  but  three  per  cent,  he  is  obliged  to 
reduce  everything  in  this  ratio,  i.  e.,  buy  the  cotton,  reduce  the 
wages  of  his  workmen,  have  just  as  ready  sales  and  collections 
as  formerly,  or  his  interest  will  be  burdensome  to  him,  for  it 
takes  just  double  the  quantity  that  it  formerly  did  to  pay  the 
three  per  cent,  interest,  and  he  must  sell  double  the  quantity  of 
cloth  to  obtain  the  same  money.  But  suppose  the  property  on 
which  the  debt  is  a  lien  is  forced  on  sale,  what  will  it  bring  ? 
Certainly  if  it  rented  as  well  as  it  did  before  when  money  was 
but  three  per  cent,  it  would  not  now  be  worth  more  than  half 
its  former  value.  Thus  the  manufacturer  is  broken  up,  and  every 
branch  of  useful  business  checked,  laborers  cannot  find  employ- 
ment ;  and  all  this  trouble  is  attributed  to  the  people  who  have 
made  the  goods  and  every  other  useful  article  :  the  capital  takes 
nearly  all  the  earnings,  allowing  the  people  who  have  earned  the 
whole  wealth  of  the  nation  to  starve,  and  this  is  called  "  finan- 
ciering," getting  things  down  to  the  specie  or  real  value. 
"When  this  process  is  over,  and  the  wealth  concentrated  in  the 
hands  of  the  few,  money  is  offered  to  the  business  people  at  a 


APPENDIX.  329 

somewhat  reasonable  interest ;  business  again  goes  on  for  a  few 
years,  when  the  same  scene  is  reacted  and  the  same  result  pro- 
duced  

All  laws  are  made  for  the  government  of  man.  Each  nation 
enacts  them  for  itself,  and  every  citizen  within  their  jurisdic- 
tion is  bound  to  obey  them.  These  laws  are  intended  to  pro- 
tect the  rights  of  property,  to  shield  the  weak  from  the  strong, 
allowing  no  one  by  oppression  or  injustice  to  take  property 
from  another  without  returning  an  equivalent.  Stealing,  is  ap- 
propriating property  without  the  consent  of  its  owner.  One 
who  steals  is  not  only  bound  by  law  to  return  the  thing  stolen, 
but  is  also  obnoxious  to  imprisonment. 

The  laws  also  protect  against  gambling.  Gambling  consists 
in  two  or  more  individuals  posting  up  any  sum  of  money,  to 
which  all  parties  agree,  then  playing  some  game,  after  which, 
the  one  who  beats  takes  all  the  money.  This  is  gambling,  be- 
cause one  man  takes  from  others  money  or  property  without 
rendering  any  equivalent.  The  others  have  lost  just  what  the 
winner  has  gained,  yet  it  was  all  done  voluntarily,  without  the 
slightest  necessity  for  it,  so  there  was  no  oppression  on  the  part 
of  the  winner  ;  the  hope  of  gain  prompted  each,  yet  they  knew 
before  they  played  all  but  one  must  lose,  still  each  hoped  to  be 
the  fortunate  one.  This  is  fair  gambling,  but  should  those  who 
had  lost  their  money  discover  that  the  winner  had  prepared  the 
cards  by  a  private  mark  on  the  back  of  each,  and  thus  had 
won  the  game,  it  would  be  called  unfair  gambling,  and  the 
persons  losing  would  say  they  had  been  cheated  out  of  their 
money. 

The  laws  prohibit  these  transactions  because  they  are  injurious 
to  the  parties  concerned,  their  families  and  the  public ;  corrupt- 
ing the  morals  of  the  community  by  the  pernicious  practice  of 
taking  from  one  his  property  and  giving  it  to  another  without 
any  equivalent.  A  gambler  is  not  generally  considered  a  busi- 
ness man.  If  it  were  asked  in  what  business  such  a  man  is,  the 
answer  would  be,  "  None ;  he  is  nothing  but  a  gambler."  I  wish 
now  to  speak  of  other  things  in  the  community  called  business, 
and  ascertain  whether  the  term  be  more  properly  applied  to  them 
than  it  is  to  the  gambler.  I  mean  the  stockjobbing  business. 
A  person  buying  stock  to  hold  for  a  time,  expects  to  sell  it  for  a 
higher  price  than  he  pays  for  it.  If  it  be  State  stock  bearing 


330  APPENDIX. 

interest  at  six  per  cent,  he  intends  to  buy  it  at  such  rates  that 
he  shall  not  only  receive  six  per  cent,  interest,  but  a  profit 
beside.  Let  us  see  whether,  if  he  buys  the  stock  below  its  par 
value,  others  will  not  lose  all  he  gains.  Suppose  it  to  be  issued 
by  the  State  and  bear  six  per  cent,  interest.  Some  individual 
•who  has  taken  it  at  par  is  compelled,  by  misfortune,  to  sell  it  for 
fifty  per  cent,  discount,  thus  losing  one  half  the  amount  for 
which  he  has  received  no  equivalent,  while  the  person  buying  it 
has  gained  precisely  what  the  other  has  lost,  and  given  nothing 
for  it 

Again,  if  the  State  itself  be  obliged  to  sell  its  own  bonds  bear- 
ing the  legal  interest  of  the  State  at  twenty,  twenty-five  or  any 
other  per  cent.,  below  par  value,  it  loses  all  the  difference 
between  the  par  value  and  the  amount  for  which  they  are  sold, 
and  the  person  buying  obtains  precisely  what  the  State  loses, 
and  this  loss  must  be  paid  by  taxing,  directly  or  indirectly,  the 
citizens  of  the  State.  These  State  stocks  bear  a  certain  rate  of 
interest,  and  both  principal  and  interest  are  as  definite  as  the 
pound  weight  or  the  yard.  The  interest  is  daily  going  on  at  a 
certain  rate,  and  the  stock  varies  from  day  to  day  exactly  the 
amount  of  the  accruing  interest  and  no  more.  But  hi  the  stock 
market  one  day  it  is  up  one,  two  or  three  per  cent. ;  the  next, 
down  one,  two,  three,  four  or  five  per  cent.,  and  then  again  up. 
In  all  these  transactions,  one  party  gains  precisely  what  the 
other  loses,  as  much  as  if  one  man  should  measure  the  pieces  of 
cloth  he  bought  of  another  with  a  yard-stick  four  feet  long,  and 
when  he  sells  measure  with  one  three  feet  long.  He  has  taken 
precisely  as  much  cloth  from  the  first  man  without  giving  any 
equivalent,  as  he  has  gained  from  the  person  to  whom  he  has 
sold  it.  The  stocks  rise  and  fall  daily,  because  some  few  indi- 
viduals combine  and  run  them  up  by  falsely  selling  to  each  other 
without  any  intention  of  delivering  the  stock,  or  if  delivered 
there  is  an  understanding  that  it  shall  be  rebought  by  the  person 
who  sold  it.  This  is  done  to  "  corner  "  some  other  persons  who 
have  sold  stock  on  time  and  have  to  deliver  it  within  a  certain 
period,  which,  if  they  cannot  do,  they  must  pay  the  difference 
or  be  disgraced  by  this  very  respectable  Board  of  Brokers.  In 
this  way,  combining  to  run  up  and  run  down  the  stocks,  they 
try  to  induce  innocent  people  to  partake  in  the  same  business. 
It  is  often  the  case  that  sundry  individuals  combine  on  certain 


APPENDIX.  331 

bank  and  railroad  stocks,  and  agree  not  to  sell  the  stocks  which 
they  own  or  control,  knowing  they  have  a  large  majority  of  that 
in  which  they  are  operators.  These  same  men  then  go  forward 
and  buy,  to  be  delivered  in  a  certain  time,  a  far  greater  amount 
of  the  same  stock  than  there  is  outstanding,  and  run  it  up  to 
double  its  former  price.  When  the  time  arrives  for  it  to  be 
delivered,  they  know  it  cannot  be  done  unless  it  is  bought 
directly  or  indirectly  from  themselves,  and  they  charge  whatever 
they  please  for  it,  or  else  they  take  the  difference,  and  the 
stock  is  not  delivered  at  all.  This  is  done  under  pretence  that 
there  is  some  real  cause  for  this  great  advance,  and  those 
unskilled  in  financial  operations  are  often  "cornered"  in  this 
way,  or  in  some  other  quite  as  unsatisfactory. 

Now  are  these  transactions  any  more  fair  than  a  private  mark 
upon  the  cards  before  gambling  ?  In  all  these  do  not  some  of 
the  parties  lose  precisely  what  the  others  gain?  In  all  this 
there  has  been  nothing  done  to  increase  the  wealth  of  the  nation 
or  the  comfort  of  man;  neither  has  it  bettered  the  morals  of 
any  one.  No  transaction  of  this  kind  deserves  the  name  of  busi- 
ness ;  and  here  let  me  explain  what  business  is. 

Take,  for  instance,  a  farmer  who  has  an  extensive  business  in 
wool,  and  suppose  him  to  have  two  thousand  sheep.  He  must 
provide  hay  and  grain  to  keep  them  during  the  winter ;  he  also 
raises  grain  to  sell.  To  cultivate  so  large  a  farm,  he  must 
employ  a  number  of  laborers,  whom  he  boards  and  pays  sufficient 
wages  to  furnish  themselves  with  good  clothing,  and  enable  them 
at  the  end  of  the  year  to  have  a  handsome  surplus.  When  the 
wool  is  ready  for  market,  the  farmer  sells  to  the  manufacturer 
for  a  price  which  will  pay  for  the  labor  devoted  to  the  sheep,  a 
reasonable  compensation  for  the  use  of  the  part  of  the  farm 
allotted  to  them,  and  a  small  profit  besides.  The  manufacturer 
converts  the  wool  into  cloth  and  sends  it  to  a  commission  mer- 
chant in  New  York  to  sell,  limiting  him  to  such  prices  as  will 
enable  him  to  pay  all  his  workmen  well.  The  manufacturer  also 
demands  a  price  sufficient  to  pay  himself  for  his  own  labor,  for 
the  use  of  his  machinery  and  manufactory,  and  to  insure  a  small 
profit.  The  commission  merchant  sells  these  cloths  to  the 
wholesale  merchant  or  jobber,  and  receives  his  commission, 
which  gives  him  a  good  living  and  a  handsome  surplus.  The 
jobber  again  sells  the  cloths  to  the  country  merchant,  and 


332  APPENDIX. 

receives  enough  to  give  him  a  good  living  and  a  reasonable 
profit.  The  country  merchant  sells  them  to  the  farmers,  mecha- 
nics, and  various  individuals  who  need  them,  and  they  wear 
them  out. 

Every  one  of  these  persons  is  making  a  living  and  saving  a 
surplus ;  the  people  who  buy  these  cloths  and  wear  them  out 
are  raising  grain,  beef,  pork,  etc.,  supplying  the  various  manu- 
facturers and  mechanics  with  food,  and  they  also  make  a  good 
living  and  some  profit.  No  one  has  lost  what  the  other  has  gained, 
but  each  and  every  one  of  them  is  gaining.  This  is  business : 
each  one  is  adding  to  his  own  comfort,  while  at  the  same  time 
he  contributes  to  that  of  all  the  others.  The  same  happy  result 
would  attend  every  branch  of  useful  business  in  our  land,  if 
business  were  pursued  and  not  gambling. 

If  this  gambling  in  stocks  and  money  affected  those  only  who 
are  in  that  "business,"  as  it  is  called,  the  evil  would  be  compa- 
ratively small,  but  it  does  not  stop  there.  This  article,  money,  is 
the  measure  of  value  of  all  the  productions  of  the  country,  and  no 
matter  where  the  farmer,  mechanic,  laborer,  merchant,  or  any 
producer  may  be  situated,  if  he  be  in  debt,  the  rise  of  interest 
from  six  to  twelve  per  cent,  per  annum,  doubles  his  debt  upon 
him  although  he  may  be  paying  but  six  per  cent,  interest  upon 
it.  It  will  take  double  the  produce  to  pay  six  per  cent,  because 
it  will  fall  in  about  that  proportion,  but  at  the  same  time  it  will 
take  the  same  labor  that  it  always  did  to  raise  a  pound  of  cot- 
ton, a  bushel  of  wheat  or  to  make  a  yard  of  cloth,  and  one  half 
the  money  will  pay  for  it,  hence  it  is  doubled  in  favor  of  the 
money  capital.  To  illustrate  this,  I  will  suppose :  A.,  who  is 
clear  of  debt,  owns  a  farm,  but  it  is  not  as  large  as  he  wishes  it. 
B.,  another  farmer,  offers  for  this  $4,000,  paying  $2,000,  and 
giving  a  bond  and  mortgage  on  the  farm  purchased  for  the  re- 
maining $2,000,  payable  in  instalments  of  $300  a  year,  interest 
at  six  per  cent.  He  expects,  with  the  assistance  of  his  family, 
to  do  all  the  work  on  the  farm,  and  thinks  he  can  easily  clear 
$300,  as  produce  commands  good  prices.  A.  purchases  another 
farm  for  $6,000,  paying  $2,000  in  cash,  and  giving  his  mortgage 
for  $4,000  at  six  per  cent,  interest  on  the  farm  purchased.  He 
agrees  to  pay  $500  a  year  and  the  interest.  He  expects  to  re- 
ceive $300  a  year  from  B.,  and  to  make  clear  at  least  $200 
besides  the  interest.  But  before  the  year  rolls  round,  the  inter- 


APPENDIX.  333 

est  on  money  rises  in  the  Atlantic  cities  from  six  to  twelve  per 
cent.  He  sees  the  newspapers  stating  the  fact,  but  thinks  it  has 
little  to  do  with  his  farming  as  he  is  paying  no  such  interest,  his 
mortgage  hearing  but  six  per  cent.  By  the  time  he  gets  his 
crops  to  market,  he  finds  produce  has  fallen,  and  even  at  lower 
prices  does  not  sell  readily.  His  neighbor  B.  does  not  receive 
as  high  a  price  for  his  produce  as  he  expected,  and  is  able  to 
pay  the  interest  and  $200  only  on  his  mortgage,  instead  of  $300 
as  he  agreed.  A,  with  difficulty  makes  his  interest  and  $300 
beside.  He  takes  the  $200  collected  from  B.  and  the  $200  he 
has  made  from  his  own  farm,  reduces  his  mortgage  to  $3,600, 
and  pays  the  interest.  Still  in  the  Atlantic  cities  interest  con- 
tinues high,  and  money  has  become  scarce  in  the  country, 
the  interest  rising  to  twelve  per  cent.,  though  the  farmers  are 
paying  but  six  per  cent,  interest  on  the  mortgages.  When  the 
crops  are  ready  for  market,  they  have  fallen  one-third  from  the 
last  year's  price :  the  cost  of  transporting  to  the  market  is  tho 
same  as  formerly,  and  when  expenses  are  deducted  they  find 
they  have  cleared  but  half  as  much  money  as  in  the  year  pre- 
vious. B.  is  able  to  pay  his  interest  and  $100  only  on  the  prin- 
cipal. A.  can  pay  the  interest  on  his  mortgage  and  $200. 
The  mortgage  is  now  reduced  to  $3,400  ;  the  person  holding  it 
insists  upon  the  amount  due  being  paid  and  forecloses  the  mort- 
gage. The  farm  for  which  A.  paid  $6,000  brings  but  $2,000,  and 
money,  by  this  time,  is  so  scarce  that  few  people  have  sufficient 
to  purchase  it.  As  A.  is  pushed,  he  sues  B.,  and  B.'s  farm 
brings  but  $1,200,  leaving  B.  insolvent  and  owing  $500,  which 
must  be  paid  from  his  future  earnings.  When  the  $1,200  are 
added  to  the  $2,000  A.'s  farm  brought,  it  would  still  leave  A. 
indebted  $200  besides  interest  and  costs.  Now  what  evil  have 
these  two  farmers  done  ?  They  and  their  families  have  worked 
hard,  and  raised  from  their  farms  provisions  for  themselves  and 
a  large  surplus  for  the  food  of  others  ;  and  who  has  reaped  the 
fruit  of  their  toil  ?  The  moneyed  capitalist,  and  without  render- 
ing the  slightest  equivalent.  I  appeal  to  persons  in  all  sections 
of  our  country  if  cas^s  quite  as  hard  as  these  have  not  occurred 
within  the  limits  of  their  observation.  These  farmers  paid  but 
six  per  cent,  interest,  and  yet  lost,  because  the  measure  of 
value  has  affected  the  produce  of  their  farms  and  tested  them  by 


334  APPKNDIX. 

a  different  measure  from  the  one  by  which  they  bought,  and 
therefore  they  fall  short  in  paying  their  debts. 

For  further  illustration,  suppose  the  State  of  New  Jersey, 
during  the  whole  time  that  the  rates  of  interest  were  fluctuating 
in  all  the  other  States,  had  maintained  hers  at  six  per  cent,  and 
retained  all  the  money  that  generally  circulates  in  the  State,  so 
that  any  citizen  could  as  easily  obtain  the  money  at  this  rate,  as 
at  any  period  of  her  existence.  Under  these  circumstances  there 
would  have  been  no  complaint  of  a  scarcity  of  money,  and  if  any 
one  unable  to  pay  his  debts  had  attributed  it  to  usury  he  would 
have  been  called  a  madman.  But  look  at  the  facts.  The  sur- 
plus produce  of  New  Jersey,  and  most  of  the  goods  manufac- 
tured there  find  their  market  in  New  York  and  Philadelphia. 
These  productions  are  tested  by  the  measure  of  value  in  these 
two  cities,  and  they  fall  off  in  price  from  one-third  to  one-half, 
while  those  consumed  in  the  State  fall  about  as  much ;  for  the 
prices  at  home  are  governed  by  the  prices  in  market.  This  in- 
creases the  amount  of  labor  to  be  performed  by  every  debtor  to 
pay  his  debts,  for  it  requires  the  same  labor  as  at  any  previous 
time  to  produce  a  bushel  of  grain,  or  any  other  article,  the  re- 
sult of  labor. 

Farms,  manufactured  goods,  machinery,  all  fall  in  price,  and 
this  operates  against  the  producers  and  in  favor  of  the  money 
capital.  The  citizens  of  the  State  may  be  great  sufferers,  and 
many  of  them  entirely  broken  up,  although  not  one  of  them  has 
directly  paid  more  than  six  per  cent,  interest  for  money  bor- 
rowed or  previously  owed,  and  not  one  has  been  troubled  to 
borrow  what  he  needed  for  his  use.  It  is  as  if  a  planter  should 
agree  to  deliver,  at  a  given  time,  a  certain  number  of  pounds  of 
cotton,  and  the  man  purchasing  should  put,  to  balance  the  cot- 
ton, double  the  weight  he  formerly  did,  still  calling  each  a 
pound.  He  doubles  the  pound  weight,  and  the  cotton  falls  short 
one  half.  The  pound  weight  tests  or  measures  the  weight,  but 
not  more  than  money  tests  or  measures  the  value.  If  the  value 
of  money  be  doubled,  the  debt  of  every  debtor  is  doubled,  and 
he  falls  short  in  payment  for  the  same  reason  that  the  cotton 
falls  short  in  weighing.  In  weighing  cotton,  doubling  the 
pound  would  be  considered  fraudulent,  but  doubling  the  value 
of  money  is  only  "  financiering."  •  •  •  • 


APPENDIX.  335 

"When  grain  is  sold,  the  size  of  the  bushel  with  which  it  shall 
be  measured  is  not  considered  a  matter  of  bargain ;  nor  when 
cotton  is  sold,  the  kind  of  weight  that  shall  be  used ;  but  it  is 
taken  for  granted  that  these  are  determined  and  fixed  by  law. 
Were  it  not  thus,  there  would  probably  be  a  street  in  each  of 
our  large  cities  devoted  to  the  business  of  changing  the  weights 
and  measures,  especially  if  a  few  individuals  were  allowed  by 
law  to  engross  them,  (as  the  banks,  brokers  and  rich  men  now 
engross  the  money).  The  one  who  could  increase  and  shorten 
the  measures  most  would  have  the  most  business.  These  people 
would  congregate  in  groups  or  on  the  corners  of  the  streets,  (as 
brokers  now  do,)  with  their  sliding  yards,  skilfully  made,  and 
all  sorts  of  measures  with  ingenious  and  false  bottoms  moved 
by  springs  invisible  to  the  common  people  ;  and  thus  the  mea- 
suring and  weighing  would  be  the  most  difficult  thing  to  accom- 
plish, in  the  same  manner  that  "  financiering  "  is  now  the  most 
difficult  business  in  the  exchange  of  property.  But  it  would  be 
impossible' to  commit  so  great  a  fraud  in  these  measures  of 
quantity  as  is  now  and  has  ever  been  committed  in  finance  by 
changing  the  value  of  the  dollar. —  Currency,  the  Evil  and  the 
Remedy. 

Q.—Page  241. 

But  again  let  us  look  at  the  money  market  in  the  city  of  New 
York,  say  this  24th  day  of  June,  1843.  Money  is  now  said  to 
be  very  plentiful,  and  is  loaned  with  much  difficulty  for  good 
security.  A  rich  man  may  now  borrow  at  from  three  to  four 
per  cent,  on  good  notes  not  having  more  than  six  or  eight 
months  to  run;  yet  another,  who  has  not  all  these  advan- 
tages, although  just  as  good  for  all  his  obligations  as  the 
richest,  will  in  the  same  bank  be  charged  six,  or  even  seven  per 
cent,  interest.  Even  now  it  is  difficult  to  procure  money  for  a 
term  of  years  on  bond  and  mortgage  at  six  per  cent,  interest, 
and  often  at  seven  per  cent.,  because  the  security  is  not  that  on 
which  capitalists  wish  to  loan  money.  They  wish  to  loan 
money  in  such  a  way  that  it  can  at  any  time  be  recalled  if  there 
is  a  change  in  the  money  market.  They  hope  business  will  soon 
start,  for  when  it  again  prospers  they  will  get  seven  per  cent, 
interest ;  and  when  it  is  quite  flourishing  they  can,  by  suddenly 
calling  in  their  money,  get  the  rates  of  interest  up  to  twelve, 


336  APPENDIX. 

eighteen  or  twenty-four  per  cent,  per  annum.  If  they  do  loan 
on  hond  and  mortgage,  they  require  it  to  be  so  secured  by  the 
property  on  which  it  is  loaned  that  it  -will  be  sure  to  bring 
enough  to  pay  the  bond  and  mortgage,  costs,  etc.  When  the 
time  arrives  that  money  will  bring  eighteen  or  twenty-four 
per  cent,  per  annum,  if  they  buy  the  property  under  foreclosure 
they  get  it  for  one-half  or  one-third  its  value ;  hence  the  diffi- 
culty of  borrowing  money  on  bond  and  mortgage;  they  are  not 
willing  to  loan  on  mortgage  more  than  half  the  present  esti- 
mated value  of  property,  which  is  now  extremely  reduced  in 
value.  The  man  who  borrows  money  at  three  per  cent,  and 
lends  it  at  six  makes  a  hundred  per  cent,  profit,  just  as  much  as 
the  man  who  buys  a  barrel  of  flour  at  three  dollars  and  sells  it 
at  six.  We  might  as  well  make  laws  which,  in  their  operation, 
would  compel  the  producing  classes  that  were  not  rich  to  pay 
double  price  when  they  bought,  and  when  they  sold  to  the  rich 
to  receive  but  half  what  they  gave :  it  would  not  be  more  certain 
to  operate  against  the  producers  and  in  favor  of  the  capitalists. 

I  will  give  an  example  of  the  operation  of  money  at  the  pre- 
sent time.  A.  being  a  rich  broker  in  Wall  street,  finds  that,  by 
borrowing  ten  thousand  dollars  from  a  bank  for  ninety  days, 
there  is  a  good  opportunity  for  him  to  make  money  on  State 
stock.  He  borrows  of  a  bank  the  ten  thousand,  at  the  rate  of 
three  and  a  half  per  cent,  interest  per  annum,  pledging  stock 
for  security.  The  interest  on  the  $10,000  for  ninety  days  is 
$87  60.  B.,  a  Pearl  street  merchant,  needing  a  discount  for 
$10,000,  applies  to  the  same  bank  the  same  day,  and  gets  his 
paper  discounted :  the  bank  charges  him  six  per  cent,  interest ; 
that  is  $150.  C.,  a  mechanic  who  has  just  finished  a  steam 
engine  and  boiler,  and  has  taken  a  note  inpayment  for  $10,000, 
applies  to  the  same  bank,  which  discounts  the  note  for 
him,  charging  him  seven  per  cent,  interest;  that  is,  $175. 
Each  of  the  three  has  bought  the  use  of  the  same  sum  of  money 
for  ninety  days :  the  money  all  belongs  to  the  bank  and  at  the 
end  of  ninety  days  must  be  returned  to  it.  One  has  paid  at  the 
same  bank,  on  the  same  day,  for  the  use  of  the  same  article, 
$87  50 ;  the  next  has  paid  $150 ;  and  the  third,  175.  The  bank, 
we  all  know,  would  not  have  discounted  any  of  these  notes 
unless  perfectly  satisfied  that  they  were  good. 

Let  us  apply  the  same  to  merchandise.    A.  buys  of  a  merchant 


APPENDIX. 


337 


a  package  of  goods  on  three  months'  credit  for  $87  50 ;  B. 
buys  the  same  day  of  the  same  merchant  a  second  package  ex- 
actly like  A.'s,  and  is  charged  $150  on  the  same  credit ;  0.  the 
same  day  buys  the  third  package,  and  is  charged  $175.  Or, 
suppose  A.  needs  a  barrel  of  flour ;  he  pays  for  it  $3  50 ;  B. 
buys  the  same  day  and  hour  another  barrel  of  the  same  quality, 
and  pays  $6 ;  and  C.  buying  another  of  the  same  man,  is  charged 
$7.  A.  is  richer  than  B.  and  B.  is  richer  than  C. ;  and  of  course 
the  richer  the  man  the  cheaper  he  must  buy,  and  the  poorer  the 
man  the  more  he  must  pay  to  increase  his  poverty. 

But  suppose  these  three  should  come  to  a  ferry  which  they 
wished  to  cross,  and  the  ferry-master  should  say  to  the  rich  bro- 
ker, "  Sir,  what  is  your  business  ?"  "  I  am  a  very  rich  man  ;  I 
deal  in  measures  of  value,  and  change  these  measures  as  much  as 
it  is  in  my  power.  I  borrow  money  out  of  bank  for  three  and 
sometimes  three  and  a  half  or  four  per  cent,  interest,  and  I  buy 
good  business  notes,  well  indorsed,  for  six  and  seven  per  cent. 
or  even  more,  as  good  notes  as  can  be  had  in  New  York ;  and 
for  several  years  past,  when  money  has  been  scarce,  I  have 
been  borrowing  money  out  of  bank,  paying  six  or  seven  per  cent, 
interest;  and  whe"  1  have  paid  these  rates  at  bank,  I  have 
usually  received  from  one  to  two  and  sometimes  three  per  cent. 
a  month  for  the  same  money  that  I  borrowed  at  six  per  cent,  a 
year ;  and  I  have  made  a  great  deal  of  money  by  this,  for  the 
merchants  have  been  hard  run."  "  Sir,"  says  the  ferry-master, 
"  you  may  have  the  use  of  our  boat  for  twelve  and  a  half  cents." 
Next  comes  the  Pearl  street  merchant,  "And  what  is  your 
business,  sir?"  '•  1  am  a  merchant,  but  business  is  very  bad, 
money  is  scarce  with  me."  "Your  fare  for  the  use  of  the  boat 
to  go  over  the  ferry  will  be  twenty-five  cents."  Next  comes  the 
steam-engine  maker.  "  What  is  your  business  ?"  "  Why,  I  am 
a  hard-working  man."  "Your  ferriage,  sir."  "What  is  it?" 
"Why,  sir,  as  yon  are  a  hard-working  man,  I  shall  charge  you 
thirty-seven  and  a  half  cents,  sir ;  our  ferry  is  a  great  accommo- 
dation to  the  public,  and  we  wish  to  do  all  we  can  to  promote 
industry  ;  step  on  board  the  boat  and  take  that  seat  where  there 
is  no  cushion ;  the  cushioned  seat,  sir,  is  reserved  for  the  gen- 
tleman broker."  Why  not  as  well  pay  the  difference  for  the  use 
of  the  boat  to  cross  the  ferry  as  to  pay  the  difference  to  bank 
for  the  use  of  money  1— Currency,  the  Evil  and  the  Remedy. 
15 


338  APPENDIX. 


D.— Page  244.* 

To  the  Editor  of  the  N.  T.  Tribune. 

Sir :  A  few  months  ago  this  country  was  enjoying  a  pros- 
perity unsurpassed  in  its  history.  The  crops,  more  abundant 
than  ever  before,  were  sufficient  to  supply  not  only  our  own 
wants,  but  to  admit  of  large  exportations.  Manufacturing 
establishments  and  railroads  employed  a  great  number  of 
persons.  The  merchants  were  conducting  their  business  with 
as  much  prudence  as  at  any  former  period.  Houses  were  being 
built  in  the  cities  and  villages,  and  in  the  farming  districts,  and 
labor  was  in  good  demand. 

Now  affairs  are  in  a  very  different  condition.  The  business 
of  the  merchants  is  broken  up ;  the  manufacturers  have  suspended 
their  operations ;  hundreds  of  thousands  of  laborers  are  thrown 
out  of  employment  and  are  in  danger  of  starvation ;  the  farmers 
cannot  get  their  abundant  crops  to  market,  and  if  they  could, 
they  would  be  obliged  to  sen  them  at  greatly  reduced  prices. 
Business  stands  still. 

This  great  change  is  rightly  said  to  be  owing  to  Lie  diflicul- 
ties  in  finance,  to  the  crisis  in  the  money  market.  All  the 
money  of  the  nation,  bank-notes  included,  amounts  to  about 
five  hundred  millions  of  dollars.  Probably  when  the  circulation 
of  the  banks  has  been  the  most  expanded  the  whole  currency 
has  never  reached  six  hundred  millions.  But  the  productions 
of  labor  for  the  last  year  are  estimated  at  three  billions  five 
hundred  millions  of  dollars — about  seven  times  as  much  as  all 
the  currency  of  the  nation,  and  these  productions  or  a  large 
proportion  of  them  will  change  hands  through  the  process  of 
manufacture,  and  otherwise,  from  three  to  eight  or  ten  times 
before  they  reach  the  actual  consumers.  Now,  this  compara- 
tively small  sum  of  money  must  pay  for  every  one  of  these 
exchanges,  or  for  every  debt  contracted  in  making  these 
exchanges.  The  same  money  must  also  pay  all  the  debts  con- 
tracted by  borrowing  money  from  banks  or  upon  bond  and 
mortgage  or  otherwise.  It  must  pay  for  all  the  lands  that  are 
sold  by  the  government  and  by  individuals ;  for  all  the  bonds 
issued  by  railroads,  cities,  States,  and  by  the  United  States ;  for 

*  Published  in  the  "New  York  Daily  Tribune,"  Nov.  27,  1S57. 


APPKNDIX.  339 

all  the  stocks  and  securities  that  are  sold  at  private  sale,  at 
auction  and  by  the  various  boards  of  brokers,  and  for  all  the 
bills  of  exchange  sold  from  one  part  of  the  country  to  another, 
as  well  as  for  all  bills  of  exchange  upon  foreign  nations.  It  is 
evident  that  this  comparatively  small  sum  of  money  must 
change  hands  a  great  number  of  times  to  effect  the  needful  ex- 
changes of  this  immense  amount  of  property,  and  that  any 
obstruction  to  its  movement  or  withdrawal  of  a  portion  of  it 
from  circulation  must  seriously  embarrass  the  business  of  the 
whole  country.  The  importance  of  this  free  circulation  of 
money  may  perhaps  be  more  fully  appreciated  when  we  state 
that  all  the  money  we  possess — gold,  silver  and  paper — would 
not  suffice  to  pay  the  board  of  this  nation  for  four  months,  at 
$1  per  week  for  each  individual. 

The  city  of  New  York  is  the  financial  centre  of  the  country. 
If  the  banks  in- this  city  keep  up  their  lines  of  discount  so  as  to 
supply  the  business  community  with  money,  the  banks  in  all 
other  parts  of  the  country  will  also  discount  and  supply  the  peo- 
ple in  their  neighborhoods.  Of  course  there  must  be  at  times, 
balances  greater  or  less  against  one  part  of  the  country  in  favor 
of  another,  but  all  these  will  be  easily  adjusted,  and  business 
will  go  on  prosperously. 

In  the  latter  part  of  August  last,  the  Ohio  Life  and  Trust 
Company,  with  a  capital  of  two  millions  of  dollars,  suspended 
payment,  with  debts  against  the  Company  to  the  amount  of  six 
or  seven  millions  of  dollars.  This  failure  was  the  apparent  oc- 
casion of  distrust,  and  of  contraction  in  bank  issues  to  the 
amount  of  some  eight  millions  of  dollars  in  the  course  of  two 
weeks ;  and  to  the  24th  of  October  of  about  twenty-six  mill- 
ions. This  contraction  of  discounts  for  the  first  two  weeks  only 
was  doubtless  a  much  greater  loss  to  the  business  men  of  this 
city  than  the  entire  capital  and  liabilities  of  the  Ohio  Life  and 
Trust  Company.  The  news  of  this  curtailment  rushed  with 
lightning  speed  to  all  parts  of  the  country,  and  carried  conster- 
nation into  every  city  and  town  where  a  bank  existed ;  and  the 
banks  in  this  city  and  throughout  the  country  called  upon  each 
other  to  pay  up  their  balances  in  specie.  Many  of  the  banks  in 
this  State  were  obliged  not  only  to  stop  discounting,  but  had  to 
send  their  State  stocks  to  this  city,  and  sell  them  at  from  15  to 
30  per  cent,  loss  to  redeem  thoir  bank  notes  and  take  them  out 


34:0  APPENDIX. 

of  circulation  in  order  to  save  themselves  from  suspension. 
But  this  was  not  the  worst  of  the  evil.  Merchants,  unable  to 
get  their  notes  discounted  at  bank,  were  driven  into  Wall 
street,  and  compelled  to  borrow  at  exorbitant  rates  of  interest 
to  meet  their  payments,  thus  rapidly  increasing  their  indebted- 
ness, and  rendering  it  inevitable  that  in  the  end  a  large  propor- 
tion of  them  should  be  made  bankrupt.  Many  of  them  paid  to 
usurers  for  the  use  of  money,  one,  two,  three,  four,  five  and  six 
per  cent,  a  month,  and  from  these  rates  to  a  quarter,  a  half  and 
sometimes  one  per  cent,  or  more  a  day,  and  were  compelled  to 
leave  double,  treble  and  quadruple  securities  to  obtain  the  money 
at  all.  The  banks  by  curtailing  their  discounts  so  that  money 
is  not  to  be  had  to  meet  the  mercantile  engagements,  remove 
the  foundation  upon  which  the  contracts  were  based ;  and  the 
merchants  can  no  more  stand  up  under  such  an  event  than  a 
house  can  stand  supported  by  the  air  if  the  foundation  be  re- 
moved from  under  it.  Money  is  the  only  thing  recognized  by 
our  laws  as  a  tender,  and  all  the  property  of  debtors  becomes 
mere  collateral  security  for  the  payment  of  money  for  their 
obligations.  Hence,  in  a  crisis  like  this,  the  great  wealth  of  the 
nation  seems  to  be  concentrated  in  the  money. 

The  banks  hold  on  deposit  millions  of  dollars  belonging  to 
the  public  on  which  they  are  paying  no  interest.  If  the  tables 
were  turned  and  the  public  should  make  the  banks  pay  five  per 
cent,  a  month  on  these  deposits  in  advance  until  they  could  pay 
them  all  off  in  specie,  the  banks  would  soon  be  as  insolvent  as 
the  merchants;  yet  it  would  be  quite  as  just  and  more  so  than 
for  the  banks  to  force  this  necessity  upon  the  merchants  and  others. 
The  banks  are  public  institutions,  and  are  authorized  by  law  to 
furnish  the  currency.  It  is  a  penal  offence  for  individuals  to  cir- 
culate their  own  notes  as  money.  Labor,  bills  receivable,  goods, 
wares  and  merchandise  are  not  money:  all  of  these  must  be  ex- 
changed for  money  in  order  to  pay  debts.  The  public  is  entirely 
dependent  upon  the  banks  for  this  money,  and  if  they  do  not 
furnish  it,  the  people  mu-t  borrow  of  usurers  at  rates  of  interest 
which  are  certain  to  eat  up  their  assets,  and  in  many  instances 
to  leave  them,  after  a  long  life  of  toil,  in  absolute  poverty. 

Our  merchants  have  sold  many  millions  of  dollars'  worth  of 
their  best  paper  at  from  three  to  six  per  cent,  a  month  discount. 
From  a  six  months'  note  for  $1,000  take  five  per  cent,  a  month, 


APPENDIX.  341 

and  the  borrower  will  get  only  $700.  The  discount  on  the  same 
note  at  seven  per  cent,  per  annum  would  he  $35.  In  this  one 
transaction  this  usury  increases  the  borrower's  indebtedness 
$265.  If  the  merchants,  manufacturers  and  mechanics  of  the 
city  of  New  York  would  come  out  and  frankly  state,  under  their 
own  signatures,  what  rates  per  cent,  interest  they  have  paid  for 
the  use  of  money  during  the  last  three  months,  giving  the  names 
of  the  parties  from  whom  they  have  borrowed  it,  and  the  secu- 
rities they  have  pledged  to  secure  the  payment  of  the  money 
borrowed,  hundreds,  yes,  thousands  of  extortions  would  be 
revealed  which  would  greatly  astonish  the  public.  Could  these 
transactions  be  further  traced,  we  think  it  would  be  found  that 
a  very  large  amount  of  the  loans  of  the  banks  are  made  to  bro- 
kers and  other  usurers,  and  even  to  the  officers  and  directors  of 
banks  themselves ;  many  of  whom  would  not  borrow  from  bank 
at  all  when  the  street  rates  of  interest  were  not  above  seven  per 
cent,  per  annum.  Let  us  look  at  the  gain  a  usurer  could  make 
on  but  $100,000.  Three  months'  discount  at  bank  would  be 
$1,750,  leaving  to  his  credit  $98,250.  This  sum  will  buy  paper 
at  six  per  cent,  a  month  to  the  amount  of  $119,817  07,  and  the 
paper  would  mature  in  time  to  meet  his  note  at  bank.  Should 
the  usurer  renew  his  note  for  another  three  months,  he  would 
have  $19,817,07  more  to  invest  than  he  had  before,  amounting 
with  the  $98,250  to  $118,067  07.  This  sum,  at  six  per  cent,  a 
month,  would  buy  $143.984  23  worth  of  notes.  Thus  the 
usurer  would  gain  $43,984  23,  on  six  months'  investment  of 
$100,000  ;  and  this  too,  without  using  a  dollar  of  his  own  money 
and  without  having  performed  any  productive  labor.  The  men 
who  sell  this  paper  are  indebted  $43,984  23  more  than  they 
would  have  been  had  the  banks  discounted  their  notes  at  the 
usual  rates,  instead  of  driving  them  to  borrow  of  the  usurer. 
This  is  the  usurer's  harvest,  when  he  is  reaping  what  others 
have  sowed  and  gathering  what  others  have  strewed. 

How  can  our  merchants  pay  these  exorbitant  rates  of  interest 
when  they  sell  their  goods  for  a  profit  of  from  five  to  fifteen  per 
cent,  at  most,  averaging  probably  not  more  than  nine  per  cent., 
and  then  trust  them  out  all  over  the  southern  and  western 
States.  And  this  is  not  all  they  have  to  encounter.  In  conse- 
quence of  the  usurious  rates  of  interest,  the  exchanges  between 
New  York  and  the  South  and  West  are  on  the  average  nearly  as 


342  APPENDIX. 

much  as  they  made  profits  on  their  goods  when  they  sold  them. 
A  merchant  holding  a  note  due  the  1st  of  November  at  bank  in 
a  western  city,  may  be  compelled  to  wait  twenty  or  thirty  days 
after  the  note  is  paid  before  a  bill  of  exchange  can  be  bought  on 
New  York.  Interest  on  money  being  at  from  three  to  six  per 
cent,  a  mouth,  the  buyer  of  the  note  would  take  oft'  the  face  of 
it  this  per  centage,  in  addition  to  the  rate  that  must  be  paid  for 
the  bill  of  exchange. 

We  think  we  have  not  overstated  the  rates  of  interest  that 
have  been  paid  during  this  crisis.  Things  have  now  reached 
such  a  state  that  usurers  have  lost  nearly  all  confidence  in  the 
ability  of  debtors  to  discharge  their  obligations ;  for  they  make 
close  calculations,  and  readily  perceive  that  the  above  rates  of 
exchange  alone  would  about  eat  up  all  the  profits  made  on  goods 
sold  during  the  last  year,  even  if  every  debt  were  promptly  paid 
at  maturity.  Add  to  this  the  depreciation  of  the  goods  they 
have  on  hand,  and  it  is  evident  that  these  must  rapidly  consume 
all  their  former  earnings.  The  indebtedness  of  the  people  has 
doubtless  been  increased  several  hundred  millions  of  dollars  by 
this  crisis.  If  business  could  have  taken  its  usual  course  the 
merchants  in  the  city  of  New  York  would  probably  have  col- 
lected fifty  millions  of  dollars  more  from  the  country  than  they 
have  now  been  able  to  do.  Had  they  made  these  collections 
and  paid  debts  to  this  amount,  the  indebtedness  of  the  people 
would  have  been  diminished  one  hundred  millions  of  dollars ; 
for  these  fifty  millions  are  still  owing  to  the  city  merchants,  and 
the  city  merchants  owe  the  fifty  millions  to  others. 

Is  not  the  country  rapidly  sinking,  instead  of  increasing  in 
wealth  ?  We  think  we  shall  not  overestimate  the  number,  if  we 
say,  there  will  be  one  million  of  people  thrown  out  of  employ- 
ment for  at  least  six  months  by  this  unnecessary  financial  crisis. 
If  this  million  of  mechanics  and  others  could  be  employed  at 
one  dollar  per  day  each,  their  earnings  would  be  six  millions  a 
week,  and  in  twenty-six  weeks  they  would  enhance  the  valua- 
tion of  the  country  one  hundred  and  fifty-six  millions  of  dollars, 
which  would  amount  to  about  as  much  as  one  half  the  banking 
capital  of  the  whole  United  States.  These  persons  who  are 
thrown  out  of  employment  must  subsist  on  previous  earnings  or 
on  the  charity  of  others,  so  that,  instead  of  being  any  longer 
producers,  they  are  compelled  to  be  simply  consumers  of  wealth. 


APPENDIX.  343 

All  this  comes  npon  us  in  addition  to  the  diminution  of  the 
value  of  our  merchants'  assets,  railroad  assets,  and  that  of  all 
other  property  in  the  country.  Nor  will  our  grain  and  cotton 
crops  command  the  same  prices  abroad  that  they  would  have 
done  if  this  money  crisis  had  not  been  brought  upon  us,  hence 
our  debts  to  foreign  nations  will  be  needlessly  increased. 

The  remedy  proposed  for  our  financial  difficulties  is  the  ac- 
cumulation of  specie ;  but  the  people  do  not  want  specie ;  they 
have  never  wanted  it  when  bank-notes  would  pay  their 
debts  and  make  their  purchases.  We  have  not  a  doubt  that 
more  than  nineteen-twentieths  of  our  debts  are  paid  with 
paper  money  ;  and  paper  money  is,  therefore,  practically  the 
money  of  this  nation.  If  the  public  did  not  prefer  to  use 
it  rather  than  coin,  paper  money  could  not  be  established 
and  made  to  transact  the  business.  A  run  for  specie  has 
never  been  made  on  the  banks  except  when  they  have  been  so 
managed  as  to  throw  the  business  community  into  the  hands  of 
usurers  and  stock-jobbers — which  is  only  another  name  for  the 
same  class  of  individuals.  Whenever  the  banks  have  maintained 
their  lines  of  discount  so  as  to  furnish  the  community  with  money, 
there  has  been  little  demand  for  specie,  and  the  gold  and  silver 
coins  have,  for  the  most  part,  lain  idle  in  the  vaults  of  the  banks. 

When  the  Ohio  Life  and  Trust  Company  suspended  payment, 
had  the  banks  in  the  city  of  New  York  discounted  every  note 
offered  that  was  considered  safe,  in  less  than  three  weeks,  and 
probably  in  one  week,  money  would  have  been  as  plenty  in  the 
city  of  New  York  and  throughout  the  country  as  it  has  been  at 
any  time  during  the  past  ten  years  ;  and  all  undoubted  securities 
that  were  bearing  V  per  cent,  interest  would  have  commanded 
money  at  their  par  value.  The  business  of  the  whole  nation 
would  doubtless  have  been  as  prosperous  as  it  has  been  at  any 
time  during  the  last  ten  years.  The  agricultural  productions  of 
the  South  and  West  would  have  been  rapidly  sent  to  market,  and 
would  have  sold  at  prices  that  would  have  remunerated  the  pro- 
ducer. Now,  if  they  are  freely  sent  into  the  market  they  will 
be  sold  at  ruinous  sacrifices.  Men  will  not  pay  4  or  5  per  cent, 
a  month  for  money  to  buy  produce  unless  they  feel  sure  they 
shall  realize  a  good  profit  over  the  4  or  5  per  cent,  by  the  in- 
vestment. 

The  banks  will  tell  the  people  that  they  could  not  have  gone 


344  APPENDIX. 

on  safely  and  discounted  all  the  well-secured  paper  offered  ;  that 
the  specie  in  their  vaults  had  been  considerably  diminished  by 
being  drawn  for  exportation,  and  was  liable  to  be  diminished  to 
a  still  greater  extent.  But  why,  when  the  specie  was  called  for 
to  subserve  its  proper  uses  of  paying  balances  that  occurred  in 
trade,  should  it  have  been  necessary  to  deprive  the  people  of 
paper  money,  for  which  the  security  is  in  State  stocks,  and  not 
in  specie  ?  Several  times  within  the  last  ten  years  the  banks 
have  sought  for  and  have  been  glad  to  discount  paper  at  the  rate 
of  five  per  cent,  per  annum,  even  when  it  had  seven  and  eight 
months  to  run  ;  and  no  good  reason  has  appeared  why  they  were 
not  as  in  good  condition  to  make  money  plenty  and  discount 
freely  in  August  last  as  they  were  at  any  previous  time  what- 
ever. 

The  banks  are  professedly  established  for  the  good  of  the  pub- 
lic, but  they  are  often  so  conducted  as  to  break  down  the  busi- 
ness of  the  country  and  enrich  usurers.  The  capital  stock  of  the 
banks  in  all  the  States  of  the  Union  would  not  exced  one-half 
of  that  invested  in  railroads,  yet  all  the  railroads  are  prostrated 
before  the  all-absorbing  power  of  the  banks.  The  prostration 
of  business  on  these  railroads,  the  usurious  interest  they  have 
paid  for  money,  and  the  depreciation  of  their  stocks  and  bonds 
in  market,  are  doubtless  a  greater  loss  to  those  interested  in  rail- 
roads alone  than  if  they  had  lost  one  half  of  all  the  banking 
capital  in  the  Union.  Besides  this,  many  of  these  railroads  will 
doubtless  go  into  the  hands  of  the  first  and  second  bond-holders ; 
and  thousands  of  the  stock-holders,  who  have  taken  the  stock 
hoping  to  benefit  the  public,  will  be  turned  out  of  their  farms 
and  homesteads,  penniless.  Is  it  not  strange  that  these  little 
round  pieces  of  metal  and  these  little  pieces  of  paper  in  the  form 
of  bank-notes,  both  of  which  look  to  be  as  powerless  and  harm- 
less as  the  toys  of  children,  should  be  clothed  with  such  power 
as  to  baffle  the  minds  of  the  most  sagacious  men  and  paralyze 
the  business  of  the  nation  ? 

Now,  to  show  what  measures  would  in  reality  afford  relief 
to  the  public,  we  will  state  what  measures  have  afforded  relief 
in  similar  financial  crises,  both  in  this  country  and  in  England, 
and  the  propriety  of  the  immediate  application  of  the  remedy 
will,  we  think,  be  apparent  to  every  business  man. 

In  1834,  large  contractions  were  made  both  by  the  United 


APPENDIX.  315 

States  and  the  State  banks,  and  for  a  few  weeks  there  was 
nearly  as  great  a  panic  in  the  money  market  as  there  was  in 
August  last,  and  quite  a  large  number  of  merchants  failed. 
But  when  the  offerings  for  discount  at  the  banks  had  become 
very  large,  the  United  States  Branch  Bank  in  the  City  of  New 
York,  unexpectedly  to  the  public,  discounted  every  piece  of 
paper  offered  that  was  deemed  good.  The  other  banks  immedi- 
ately followed  this  example,  and  in  a  very  short  time  the  rates 
of  interest  went  down  from  two,  three  and  four  per  cent,  a 
month  to  five,  six  and  seven  per  cent,  per  annum,  and  business 
at  once  revived  and  went  on  prosperously. 

In  1847  (I  quote  from  memory)  there  was  a  great  financial 
crisis  in  England,  the  issues  of  the  Bank  of  England  having 
been  limited  by  the  financial  bill  of  Sir  Robert  Peel,  passed  in 
1844.  The  rates  of  interest  rose  from  3,  4  and  5  per  cent,  per 
annum  to  1,  2,  3  and  even  higher  rates  per  month,  and  thou- 
sands of  merchants  and  manufacturers  were  bankrupted  and  had 
to  suspend  payment.  A  meeting  was  called  in  London,  and  a 
committee  was  appointed  to  wait  on  Lord  John  Russell  and 
request  that  the  Bank  of  England  should  extend  her  discounts 
so  as  to  make  money  plenty.  Lord  John  replied  that  it  was 
contrary  to  the  laws  of  England  to  increase  the  circulation  be- 
yond the  fourteen  millions  of  pounds  sterling  secured  by 
government  stock ;  that  the  issues  above  this  sum  must  be 
governed  by  the  amount  of  bullion  in  the  bank ;  that  he  had  no 
authority  to  exceed  this  amount,  and  that  the  people  must  take 
care  of  their  own  financial  affairs.  The  committee  retired  with- 
out obtaining  any  relief.  A  few  days  or  weeks  after,  the 
committee  waited  again  upon  Lord  John  Russell,  with  a  similar 
request,  and  met  with  a  similar  refusal.  But  before  retiring 
they  remarked  that  they  should  break  the  bank.  Lord  John 
Russell  asked  them  if  they  could  do  it,  and  the  committee 
informed  him  that  the  gentlemen  whom  they  represented  had  a 
much  larger  amount  on  deposit  than  all  the  bullion  in  the  bank ; 
that  they  should  draw  what  there  was  and  take  their  chances 
for  the  balance.  This  strong  argument  had  its  effect  on  the 
mind  of  Lord  John  Russell,  for  the  bank  at  once  began  to  dis- 
count liberally.  Money  became  very  plenty  at  very  low  rates 
of  interest,  and  business  revived. 

In  the  present  crisis,  the  same  means  must  be  used  to  relieve 

15* 
- 


34:6  APPENDIX. 

us  from  our  financial  difficulties  that  ought  to  have  been  used  to 
prevent  their  occurrence.  Let  the  banks  in  the  city  of  New- 
York  discount  every  piece  of  paper  offered  which  they  consider 
safe  and  good,  and  let  them  adjust  their  balances  among  them- 
selves and  with  other  banks  throughout  the  Union  as  they  have 
hitherto  done  when  money  was  plenty.  Let  them  discount 
paper  that  has  four,  five  and  six  months  to  run  as  well  as  short 
paper.  They  can  do  this  as  well  now  as  they  ever  could  at  any 
previous  time.  Let  them  discount  thus  liberally  and  the 
business  of  the  nation  will  revive  ;  the  products  of  the  South 
and  West  will  find  their  way  to  market,  and  command  much 
better  prices  both  at  home  and  abroad  than  they  possibly  can 
BO  long  as  this  contraction  of  bank  issues  continues.  Many  of 
our  railroads  may  yet  go  on  and  prosper. 

But  let  the  banks  continue  their  present  course  and  they  will 
continue  to  throw  the  money  into  the  hands  of  the  usurers,  and 
the  usurers  will  stand  between  the  banks  and  the  business 
public.  Many  more  of  our  merchants  will  be  broken,  and 
those  who  have  suspended  will  be  obliged  to  renew  their  exten- 
sions. There  will  be  hundreds  and  thousands  of  starving 
laborers  in  onr  streets,  while  this  year's  abundant  crops  will  be 
stored  away  in  granaries  for  want  of  money  to  get  them  to 
market.  The  property  of  debtors  will  be  exhausted  and  thrown 
into  the  hands  of  creditors,  and  there  will  be  few  securities  re- 
maining to  offer  for  the  loan  of  money.  The  usurers  will 
themselves  cease  to  borrow  largely  at  bank,  for  there  will  be  few 
left  to  borrow  of  them.  The  banks,  then,  finding  their  business 
falling  off,  will  begin  to  discount  freely,  and  money  will  be 
seeking  investment  at  low  rates  of  interest  and  the  useful 
business  of  the  nation  will  gradually  revive.  Whether  business 
shall  revive  now,  our  manufacturers  resume  their  operations, 
our  laborers  be  employed ;  or  whether  the  present  condition  of 
the  money  market  shall  continue  until  the  country  is  completely 
prostrate,  and  the  wealth  of  the  nation,  for  the  greater  part, 
accumulated  in  the  hands  of  the  usurers,  is  at  the  option  of  the 
banks  in  the  city  of  New  York. 

EDWARD  KELLOGG. 

Brooklyn,  Nov.  13<A,  1857. 


APPENDIX.  347 


E.— Page  245. 

"When  we  read  of  our  ancestors  in  ages  long  past  carving  ont 
of  wood  some  strange  and  grotesque  image,  and  then  falling 
down  in  adoration  before  it,  as  though  it  had  some  mysterious 
power  by  which  the  heavens  and  earth  were  brought  forth  and 
sustained  in  their  orbits ;  and  to  which  the  nations  of  the  earth, 
were  bound  to  offer  up  not  only  the  choicest  fruits  of  their  labor, 
but  also  their  own  lives  and  those  of  their  children  in  order  to 
appease  this  deity,  and  that  even  kings  and  the  chief  rulers  of 
nations  bowed  down  in  worship  before  the  power  of  a  wooden 
or  brazen  god,  we  look  back  with  astonishment  at  the  ignorance 
and  superstition  that  prevailed,  and  congratulate  ourselves  that 
these  have  disappeared  in  the  sunshine  of  an  enlightened  age. 
But  the  time  is  not  distant  when  people  will  look  back  on  this 
gold -ridden  age  with  as  much  wonder  at  our  ignorance,  and  at 
the  superstition  that  now  attaches  to  the  power  and  worth  of  the 
gold,  as  we  do  at  the  power  and  worth  which  our  ancestors 
gave  or  attached  to  the  wooden  god.  Their  wooden  gods  had 
as  much  power  to  create  and  sustain  the  world,  as  the  gold  has 
to  nourish  the  human  body,  or  bring  out  and  sustain  the  virtues 
of  the  human  mind.  We  sacrifice  the  choicest  fruits  of  our 
labor  upon  the  altar  of  this  golden  god.  We  sacrifice  to  it  in  wars 
and  tumults  the  property  and  lives  of  our  own  citizens,  and 
those  of  the  men,  women,  and  children  of  neighboring  nations. 
Even  the  rulers  of  nations  must  bow  down  before  the  "  almighty 
dollar."  If  these  golden  images  are  hidden  in  vaults  under  the 
earth,  and  the  rulers  want  to  carry  on  wars,  they  must  make 
sacrifices  of  the  fruits  of  the  labor  of  future  generations,  that 
they  may  he  brought  forth  to  sustain  the  slaughter.  If  these 
mighty  coins  should  move  off,  and  cease  to  be  seen  in  our  land, 
we  should  have  to  bow*down  our  heads  in  the  dust,  and  clothe 
ourselves  in  sackcloth  and  ashes  until  they  were  returned  to 
us;  the  laboring  poor  would  die  of  hunger  in  the  streets 
of  our  cities,  and  desolation  and  gloom  would  spread  over  the 
country.  But  how  does  it  happen  that  these  gold  and  silver 
dollars  could  cause  all  this  ?  Is  it  because  the  metals  have  any 
more  sustenance  for  man  than  the  carved  images  which  ruled 
over  our  fathers  ?  Have  we  not  as  much  made  and  formed  these 


348  APPENDIX. 

gold  and  silver  images  with  our  hands  as  they  did  the  images 
that  they  carved  out  for  themselves  with  their  hands?  Has  the 
gold  or  silver  a  single  more  element  for  human  support  than 
their  carved  images ;  and  if  they  have,  are  the  inherent  quali- 
ties of  these  metals  any  more  used  while  they  form  a  currency 
than  the  inherent  qualities  of  the  wood  when  it  was  formed  into 
an  image  and  daubed  over  with  pitch  and  paint  ?  Or  would  the 
earth  cease  to  hring  forth  her  increase  because  the  gold  and 
silver  had  absented  themselves  from  the  land,  more  than  if  these 
carved  images  should  have  been  removed  from  the  land  of  our 
fathers  ?  No  doubt  the  removal  of  the  images  would  have  been 
thought  a  great  calamity,  but  not  more  so  than  the  removal  ol 
the  gold  and  silver  money  in  our  day ;  and  they  would  have 
had  as  much  reason  for  their  distress  as  we  should  for  ours. 
The  removal  now  of  a  few  tons  of  gold  and  silver  coins  from 
our  country  to  a  foreign  one,  or  even  from  one  part  of  our 
country  to  another,  causes  great  agitation  and  consternation ; 
but  the  time  is  not  far  distant  when  the  removal  of  a  few  tons 
of  these  metals  will  have  no  more  influence  upon  the  happiness 
and  welfare  of  the  people  than  the  removal  of  a  few  hundred 
tons  of  iron  or  lead.— MSS. 


F. — Page  247. 

The  most  fundamental  and  important  truths  in  relation  to 
the  nature  of  money,  have  always  been  so  covered  up  by  the 
technicalities  of  law  as  completely  to  deceive  the  people  respect- 
ing its  true  character,  although  they  have  always  known  and 
felt  that  there  was  something  wrong  in  its  power.  Writers 
upon  political  economy  as  well  as  the  public  in  general,  have 
taken  it  for  granted  that  the  laws  of  nations  were  right  in 
founding  the  value  of  money  in  the  innate  value  of  the  gold  and 
silver  metals  out  of  which  it  was  coined :  hence  the  conclusions 
at  which  they  must  all  arrive,  are  just  as  false  as  the  premises 
upon  which  they  start.  And  political  economists  may  continue 
to  write  and  the  public  may  continue  to  argue  upon  these 
premises  for  centuries  to  come,  and  be  just  as  far  from  the 
truth  as  when  money  was  instituted  upon  this  basis.  Not- 
withstanding this  mystification  about  money,  its  true  cha- 
racter and  power  are  yery  simple,  and  nee^  only  to  be  clearly 


APPENDIX.  349 

and  fairly  stated  to  meet  the  approval  of  the  common  mind ; 
and  then  the  public  must  know  that  the  present  centralizing 
power  of  money  is  as  gross  an  imposition  upon  the  com- 
mon sense  of  man,  as  it  is  upon  the  common  rights  of  labor 
and  property.  For  if  the  material  of  neither  gold,  silver  nor 
paper  money  can  in  itself  be  used  as  food,  clothing  or  shelter, 
then  certainly  the  scarcity  or  abundance  of  money,  or  the 
scarcity  or  abundance  of  the  materials  of  money,  ought  never 
in  the  least  to  interfere  with  a  general  and  full  supply  of  all  the 
necessaries  of  life.  For  these  necessaries  of  life  are  evidently 
the  product  of  labor,  and  not  the  product  of  money.  Yet  the 
present  power  of  money  is  such  that  the  people  are  compelled 
first  to  work  for  money,  and  then  to  depend  upon  the  power  of 
money  to  supply  the  necessaries  of  life.  Thus  the  power  of 
money  is  first,  and  the  power  of  labor  is  second.  The  money 
commands  the  labor  instead  of  labor  commanding  the  money. 
This  is  exactly  reversing  the  true  order  of  things,  for  it  is 
making  a  dead  centralizing  power  to  rule  and  tyrannize  over 
the  living,  productive  power,  whereas  the  productive  ought 
always  to  command  the  unproductive  power.  If  any  writers 
upon  political  economy,  or  any  financiers,  have  discovered  the 
true  nature,  power  and  use  of  money,  they  have  not  made  such 
discovery  manifest  to  the  understanding  of  the  public.  For 
the  laws  of  nations  as  well  as  the  newspapers  and  other  publica- 
tions of  the  day,  are  still  carrying  forward  and  enforcing  the 
idea  that  money  is  a  productive,  living  power.  Yet  the  power 
of  money  is  entirely  a  dead  power,  and  totally  unproductive 
notwithstanding  its  legal,  accumulative  powers. — MS8. 

G. — Page  253. 

Let  me  illustrate  the  effects  of  "  free  trade  "  in  the  use  or 
interest  on  money  loaned— a  plan  which  is  advocated  by  many 
people  in  our  cities,  and  doubtless  by  many  in  the  country. 
They  say,  Make  merchandise  of  money,  let  the  man  who  will 
give  the  most  for  its  use  borrow  the  money,  and  allow  no  laws 
to  interfere  between  the  parties  contracting— if  A.  has  money 
and  H.  wants  it,  let  B.  buy  its  use  as  cheap  as  he  can  from  A., 
and,  if  he  is  not  suited  with  the  price  A.  demands  for  it,  let  him 
borrow  of  some  other  person :  he  is  not  obliged  to  take  A.'s 


350  APPENDIX. 

money  any  more  than  he  is  compelled  to  bay  A.'s  potatoes ;  has 
not  a  man  a  right  to  do  what  he  will  with  his  own  ?  A  captain 
of  a  ship  at  sea  might  see  on  fire  near  him  another  ship,  full  of 
people,  and  say  to  the  passengers  and  crew  of  the  burning  vessel, 
"  If  you  will  give  me  all  your  possessions  in  money,  goods  and 
chattels,  I  will  take  you  on  my  ship :  but,  if  you  do  not  wish  to 
comply  with  my  terms,  I  shall  not  take  you  on  board ;  this  ship 
is  mine,  and  I  have  a  right  to  do  what  I  will  with  my  own.  I 
shall  not  urge  you  to  come  on  my  vessel  on  the  terms  I  propose ; 
you  had  no  business  to  place  yourselves  in  such  a  situation ;  it 
is  your  own  fault,  not  mine ;  therefore  if  you  do  come  it  is 
because  I  like  to  help  people  out  of  difficulties.  My  humanity 
prompts  me  to  make  this  offer."  Do  you  not  think  the  passen- 
gers and  all  would  accede  to  the  terms,  and  be  glad  to  get  on 
board  of  the  ship  of  this  humane  man  ?  If  this  benevolent  cap- 
tain had  secretly,  by  the  aid  of  ship-brokers,  set  the  vessel  on  fire 
with  a  slow  match,  and  then  happened  to  be  near  and  proposed 
these  terms  to  those  in  distress,  he  would  be  in  principle  much 
like  our  modern  usurers,  who  hoard  the  public  measure  of  value 
when  they  very  well  know  that  it  is  impossible  for  the  public 
—either  individuals,  States,  or  the  United  States— to  fulfil  their 
contracts  without  the  money,  and  they  can  make  any  terms  they 
please  with  those  in  distress.  The  captain  of  the  ship  would 
have  about  as  much  good  feeling  for  the  passengers  and  crew  of 
the  burning  vessel,  as  these  men  have  who  hold  the  money  to 
extort  the  last  farthing  from  the  producers. 

Suppose  a  surveyor  owns  his  chain  to  measure  land,  and,  when 
appointed  by  government  a  public  measurer  of  land,  should  say 
to  one  needing  his  service,  "  The  chain  is  mine,  and  I  will  stretch 
it  out  to  double  its  legal  length  if  you  will  give  me  so  much  for 
measuring ;"  to  another,  "  I  will  contract  so  much  if  you  will  pay 
me  for  it ;  the  chain  is  mine,  and  have  I  not  a  right  to  use  it  as 
I  please  ?  Who  has  any  right  to  dictate  to  me  what  I  shall  do 
with  my  property  ?"  Now,  the  length  of  the  chain  being  altered 
one-third,  does  not  more  effectually  alter  the  quantity  of  land 
measured,  than  adding  one-third  to  the  interest  on  money  alters 
every  contract  based  on  money,  and  the  public  measurers  would 
have  as  good  right  to  use  their  chains  in  this  way  as  a  man  loan- 
ing money  has  to  alter  the  interest  on  the  money.  No  matter 
in  whose  hands  money  may  be,  it  is  a  definite  thing,  and  the 


APPENDIX.  351 

only  public  measure  and  base  of  value  of  everything  in  all 
nations. 

Free  trade  in  the  use  in  loaning  money  ia  as  certain  to  prove 
destructive  to  the  debtor's  property  as  a  free  right,  because  you 
own  your  knife,  to  plunge  it  into  your  neighbor's  breast  would 
be  certain  to  endanger  his  life.  We  are  as  much  in  duty  bound 
to  protect  our  citizens  by  law  from  these  depredations  upon  their 
property,  as  we  are  to  protect  them  by  law  against  the  assassin's 
knife.  For  many  a  man  who  through  a  long  life  has  been  able 
to  support  his  family  comfortably,  has  not  been  able  to  bear  up 
under  these  sudden  and  unexpected  robberies,  generally  called 
misfortunes,  and  aberration  of  mind  or  death  has  been  the  con- 
sequence, and  he  has  left  his  family  to  the  cold  charities  of  the 
world. 

II.— Page  282. 

If  the  Safety  Fund  should  lend  its  money  at  six  per  cent,  in- 
terest, and  Richard  Roe  should  borrow  $1,000  on  mortgage  of 
his  farm  that  rents  for  $120  a  year,  every  year  he  would  have 
to  pay  to  the  Safety  Fund  $60  interest  or  one  half  the  rent  of 
his  farm.  The  $1,000  in  money  would  represent  the  first  half 
of  the  value  of  the  farm ;  and  Richard  Roe  would  have  to  lose 
all  the  second  half  before  the  Safety  Fund  could  lose  any  por- 
tion of  the  half  on  which  it  had  lent  him  the  money.  The 
Safety  Fund  money  being  always  the  representative  of  the  first 
half  of  the  value  of  productive  property  the  second  half  of  the  value 
must  entirely  sink  before  the  first  half  could  be  at  all  deteriorated. 

The  lower  the  interest  on  the  Safety  Fund  money,  the  greater 
would  be  the  certainty  of  its  perfect  security  and  goodness. 
For,  if  Richard  Roe  should  borrow  from  the  Fund  the  $1,000 
at  six  per  cent,  interest  yearly,  in  less  than  twelve  years  he 
would  have  to  pay  over  to  the  Safety  Fund  in  interest  a  sum 
equal  to  the  principal  that  he  borrowed ;  that  is,  one  half  the 
entire  value  of  his  farm.  But  suppose  the  interest  should  be 
fixed  at  one  and  one  tenth -per  cent,  per  annum,  and  he  should 
borrow  the  $1.000  at  this  rate  on  mortgage  of  his  farm,  he 
would  have  but  $11  a  year  to  pay  instead  of  $60,  and  it  would 
be  above  sixty  years  before  he  would  have  to  pay  back  to  the 
Safety  Fund  in  interest  a  sum  equal  to  the  principal  borrowed, 
that  is,  one  half  of  the  value  of  his  farm. 


352  APPENDIX. 

If  the  per  centage  interest  be  regular,  the  producer  cannot  be 
made  to  pay  a  sum  in  rent  or  interest  equal  to  the  principal  in 
any  shorter  time  whether  you  call  a  given  lump  of  gold  or  a 
certain  farm  worth  $100  or  $1,000.  If  John  Doe  owns  this  lump 
of  gold  or  this  farm,  and  rent  either  to  Richard  Roe  at  ten  per 
cent,  per  annum  without  compounding  the  interest,  in  ten  years 
the  latter  must  pay  a  sum  in  interest  equal  to  the  principal  bor- 
rowed. If  the  lump  of  gold  or  the  farm  were  called  worth 
only  $100,  and  were  rented  at  the  same  rate  of  ten  per  cent., 
Richard  Roe  would  still  pay  back  in  ten  years  a  sum  in  interest 
equal  to  the  principal  borrowed.  But  if  he  borrowed  the  same 
lump  of  gold  or  the  same  farm  at  one  per  cent,  without  com- 
pounding the  interest,  it  would  be  a  hundred  years  before  he 
would  have  to  pay  to  John  Doe  a  sum  in  interest  equal  to  the 
principal. 

The  interest  on  money  is  the  standard,  and  the  rents  of  all 
property  must  conform  to  its  governing  power.  Although  this 
principle  has  been  repeatedly  stated,  as  it  is  important  that  it 
should  be  clearly  understood  in  connection  with  the  Safety 
Fund,  we  will  offer  another  simple  illustration.  Suppose  John 
Doe's  farm,  in  consequence  of  the  reduction  of  interest  on  the 
establishment  of  the  Safety  Fund,  to  rise  in  value  from  $2,000 
to  $10,000,  and  the  Fund  to  lend  him  on  mortgage  of  it  $5,000 
at  one  and  one-tenth  per  cent,  interest.  The  yearly  interest  on 
the  $5,000  would  be  but  $55,  and  before  John  Doe  must  return  to 
the  Safety  Fund  a  sum  in  interest  equal  to  the  principal  bor- 
rowed, the  same  number  of  years  would  elapse  as  if  the  farm 
had  not  risen  in  price  in  consequence  of  the  reduction  of  the 
rate  of  interest.  John  Doe  need  not  pay  to  the  Fund  a  sum  in 
interest  equal  to  one-half  the  value  of  his  farm  in  less  than 
sixty  years,  but  if  the  interest  were  at  six  per  cent.,  he  would 
have  to  pay  a  sum  in  interest  equal  to  the  principal  borrowed 
in  less  than  twelve  years.  It  must  be  borne  in  mind  that  the 
value  is  in  John  Doe's  farm  and  not  in  the  money :  the  money 
merely  represents  the  value  of  the  farm.  The  interest  that  ac- 
crues on  the  Tnoney  borrowed  is  a  representative  of  production, 
but  it  is  not  production.  The  production  is  made  by  labor  upon 
the  farm  ;  the  interest  that  accrues  upon  the  money  is  an  arbi- 
trary, legal,  balancing  power  against  a  certain  part  of  the  pro- 
ducts of  the  farm.  The  money  merely  helps  the  people  to 


APPENDIX.  353 

exchange  one  commodity  for  another ;  and  the  rate  of  interest 
decides  what  proportion  of  the  products  of  labor  shall  be 
awarded  to  those  who  perform  the  labor  and  what  proportion 
shall  go  to  those  who  receive  the  income  without  labor. — MSS. 

I.— Page  289. 

I  will  examine  a  little  further  the  operations  of  money  upon 
our  commerce  and  foreign  trade.  In  order  to  explain,  I  will  sup- 
pose a  case :  It  is  known  to  our  government  and  citizens  that 
very  many  wealthy  houses  of  Europe  have  agents  or  bankers  in 
our  large  commercial  cities.  The  Rothschilds,  Barings,  and 
many  others  of  this  class  wield  an  immense  capital,  and  are  able 
to  raise  almost  any  sura  of  money  which  can  be  advantageously 
invested.  The  very  purpose  for  which  these  houses  are  estab- 
lished here  is  to  make  money  by  buying  stocks,  advancing  on 
securities  and  drawing  bills  of  exchange  on  foreign  nations,  etc. 
The  general  business  of  these  bankers  is  dealing  in  money,  not 
in  merchandise ;  they  may  make  advances  on  cotton,  but  this  is 
not  dealing  in  cotton — it  is  simply  holding  the  pledge  of  cotton 
as  collateral  security  for  the  payment  of  money  loaned.  These 
houses  are  in  the  habit  of  drawing  bills  of  exchange  on  England, 
Germany,  France  and  other  countries,  for  large  sums,  and  it  is 
in  their  power  at  any  time  to  derange  our  whole  monetary  sys- 
tem and  disturb  our  domestic  trade  throughout  the  country. 
Thus  they  could  make  great  profit,  but  it  would  be  by  robbing 
us  of  our  just  rights ;  and  the  consequent  fluctuations  would  put  it 
in  the  power  of  creditors  throughout  the  nation  to  take  undue 
advantage  of  debtors.  I  will  merely  state  the  case,  and  I  think 
no  business  man  can  fail  to  see  the  practicability  of  such  an  ope- 
ration. These  bankers  in  the  different  Atlantic  cities  have 
wealth  and  credit  sufficient  to  draw  bills  of  exchange  on  England, 
France  and  Germany,  dispose  of  and  get  the  money  for  them  in 
the  course  of  one  or  two  months  to  the  amount  of  five,  six,  seven 
or  more  millions  of  dollars,  as  our  foreign  trade  amounts  to  about 
one  hundred  millions  a  year,  which  are  paid  by  bills  of  exchange ; 
thus  the  drafts  to  pay  this  sum  would  average  over  eight  mil- 
lions a  month,  and  when  the  largest  amount  is  required  to  be 
remitted,  it  would  be  an  easy  matter  for  these  bankers,  through 
their  agents,  to  sell  in  two  months  seven  or  eight  millions  of  ex- 
change on  the  various  countries  before  mentioned.  Several 


354:  APPENDIX. 

houses  have  agents  in  a  number  of  our  Atlantic  cities  and 
whether  they  sold  bills  of  exchange  on  England  or  France  at 
New  York,  New  Orleans,  Baltimore,  Philadelphia  or  Boston, 
they  could  easily  concentrate  all  the  funds  in  New  York,  and  as 
the  money  came  in  for  the  bills  of  exchange  sold,  they  could 
draw  the  amount  from  the  New  York  banks  in  specie,  and  ship 
it  to  England  or  any  other  country  to  meet  the  drafts.  The 
drafts  being  drawn  as  usual,  payable  sixty  days  after  sight,  they 
would  have  sixty  days  to  prepare  and  ship  the  specie  to  meet 
the  drafts  at  maturity.  If  they  have  the  credit  to  draw  and  sell 
the  drafts,  all  these  operations  could  take  place  with  little  or  no 
capital.  If  even  three  or  four  millions  in  specie  in  the  course  of 
one  or  two  months  were  drawn  from  the  New  York  banks,  it 
would  curtail  their  discounts  and  probably  raise  the  rates  of 
interest  in  Wall  street  to  one,  one  and  a  half  or  more  per  cent. 
a  month.  Should  it  be  attempted  to  draw  suddenly  seven  or 
eight  millions,  no  doubt  a  suspension  of  specie  payment  by  the 
banks  throughout  the  Union  would  be  the  result ;  exchange  on 
England  would  rise  to  fifteen  or  twenty  per  cent,  above  par, 
and  a  general  scarcity  of  money  would  ensue ;  cotton  would  fall 
to  half  its  former  price,  and  as  it  fell  in  our  market  it  would  also 
fall  in  England ;  exchange  on  England  being  very  high,  the  cot- 
ton at  greatly  reduced  prices  would  be  hurried  forward  to  pay 
debts  in  England,  and  we  should  be  compelled  to  send  double 
the  quantity  of  cotton  or  any  other  product  to  pay  our  debt 
abroad  (or  again  to  import  the  same  amount  of  specie)  that  we 
should  if  our  currency  had  not  been  deranged.  Thus  we  should 
be  robbed  of  nearly  one  half  of  our  products  without  receiving 
for  them  the  slightest  equivalent ;  and  the  debtors  in  our  own 
country^  by  the  rise  of  interest  and  the  scarcity  of  money,  would 
be  obliged  to  give  double  the  labor  or  property  to  meet  their 
engagements  at  home.  The  exchanges  would  be  deranged 
throughout  the  country,  the  banks  would  curtail  their  discounts, 
and  distress  and  ruin  ensue.  Such  operations  as  these,  impairing 
the  ability  of  producers  and  consumers  to  buy,  by  causing  a  fall 
in  the  price  of  cotton  and  other  products,  would  in  turn  destroy 
the  market  for  goods  manufactured,  and  cause  goods  and  labor 
to  fall  in  England,  and  the  laboring  poor  would  be  impoverished 
there ;  the  capital  or  wealth  of  both  nations  would  be  concen- 
trated in  the  hands  of  a  few  without  rendering  the  least  equi- 


APPENDIX.  355 

valent  to  those  who  earned  it.  Now,  to  what  would  all  these 
troubles  be  attributed,  and  to  what  have  like  revulsions  been 
always  attributed?  Why,  to  over-production,  over-trading,  too 
much  credit,  etc.  These  disasters  are  laid  at  the  door  of  the 
honest  producer  and  trader,  while  the  real  cause  is  either  con- 
cealed, or  at  all  events  is  not  understood 

Suppose  one  hundred  of  the  richest  men  in  the  city  of  New 
York  should  agree  to  draw  specie  from  the  banks  and  hold  it 
themselves  for  a  given  time— say  one,  two,  or  three  months- 
keeping  the  engagement  to  themselves,  so  that  the  public  would 
be  unacquainted  with  their  intentions:  less  than  eighty-five 
thousand  dollars  for  each  individual  would  draw  every  dollar  of 
specie  from  every  bank  in  the  State,  and  some  of  these  men 
could  easily  furnish  several  times  the  sum  allotted  to  each.  All 
who  would  make  these  drafts  are  the  actual  owners  of  the  money 
they  would  draw  from  the  banks  ;  and  as  they  owe  no  one,  they 
could  keep  it  as  long  as  they  pleased,  whether  one,  two,  or  three 
months  or  longer.  I  presume  no  one  acquainted  in  New  York 
would  doubt  the  ability  of  one  hundred  of  our  citizens  to  com- 
mand this  money  without  being  indebted  to  any  one  for  a  dol- 
lar ;  but  should  this  be  questioned,  it  would  only  be  necessary 
to  add  a  few  to  the  number  to  accomplish  it.  Should  this  be 
done,  every  bank  in  the  city  must  stop  specie  payment ;  and  this 
would  probably  cause  a  run  on  the  banks  in  all  the  Atlantic 
cities,  and  another  suspension  throughout  the  United  States 
would  be  the  consequence.  This  would  at  once  occasion  a  great 
scarcity  of  money,  and  would  reduce  property  much  below  its 
present  price  ;  then  suppose  the  men  who  held  this  specie  should 
denounce  banks  and  State  stock,  saying  all  this  kind  of  paper  is 
worth  next  to  nothing,  and  that  all  sorts  of  property  ou<fht  to 
be  sold  for  specie,  as  there  is  certainly  no  dependence  to  be 
placed  in  banks.  Let  these  men  still  hold  the  specie,  and  not 
buy  a  dollar's  worth  of  property  themselves  for  six  months — I 
ask  what  would  property  bring,  provided  a  mortgage,  or  one 
hundred  mortgages,  were  foreclosed  in  New  York,  and  the  pro- 
perty sold  for  specie?  If  a  bank  should  be  sued,  and  it  held 
State  stock  as  collateral  security,  and  should  sell  it  for  specie, 
what  would  the  stores,  houses,  and  State  stock  bring  in  specie? 
Who  would  have  the  specie  to  buy  them?  The  property  would 
not  sell  for  more  than  a  quarter  of  its  present  estimated  value  ; 


356  APPENDIX. 

yet  these  men  have  a  right  by  law  to  do  all  this,  and  the  State 
and  the  United  States  Government  would  be  utterly  powerless 
in  the  matter,  and  could  not  help  themselves  nor  the  citizens. 
These  hundred  men  would  hold  nearly  all  the  legal  tender  of  the 
State,  and  the  citizens  are  bound  by  law  to  pay  their  debts  in 
this  tender,  which  it  would  be  impossible  for  them  to  procure ; 
they  could  no  more  pay  them  than  the  children  of  Israel  could 
make  brick  without  straw ;  they  could  neither  get  the  money 
from  abroad  nor  at  home:  credit  would  be  entirely  prostrated 
and  the  laborer  beg  from  door  to  door.  Yet  such  are  our  laws 
on  this  all-important  subject :  our  citizens  are  absolutely  legally 
robbed  by  their  own  neighbors  and  before  their  own  eyes,  but 
have  no  power  to  prevent  it. 

It  will  be  said  that  these  hundred  men  would  lose  the  interest 
on  their  money,  and  therefore  there  would  be  no  inducement  to 
this ;  but  I  answer  specie  would  bring  a  much  greater  premium 
than  all  the  loss  of  interest,  or  they  could  buy  good  bonds  and 
mortgages  at  an  enormous  sacrifice,  or  property  for  less  than 
half  its  value.  If  they  chose,  before  they  made  the  run  on  the 
banks,  they  could  sell  State  or  bank  stock,  to  be  delivered  at  a 
certain  time  within  three  or  six  months,  and  calculate  with  a 
moral  certainty  that  the  stock  would  fall  in  price  so  that  they 
could  take  the  difference  without  buying  the  stock  at  all ;  and 
if  they  should  buy  it,  they  could  have  it  delivered  the  same 
day,  and  draw  the  money  they  pay  for  the  stock  from  the  per- 
sons to  whom  they  sold,  without  encroaching  on  one  dollar 
of  the  specie  drawn  from  the  banks.  These  hundred  men  by 
this  means  would  doubtless  more  than  double  their  money.  The 
public  have  nothing  to  guard  them  against  this  but  the  tender 
consciences  of  these  men,  and  the  people  who  have  within  a  few 
years  past  paid  to  them  from  one  to  four  per  cent,  a  month  for 
the  interest  or  the  use  of  money,  with  every  pledge  which  the 
parties  could  possibly  give  to  secure  the  safe  return  of  the  money, 
can  pretty  well  judge  as  to  the  conscientious  scruples  of  our 
most  wealthy  moneyed  men  in  the  city. 

When  hard  times  begin,  the  merchants,  who  are  the  first  to 
feel  the  pressure,  look  about  to  see  what  expenses  they  can 
avoid.  They  dismiss  some  of  their  clerks  and  cut  down  the 
salaries  of  others ;  for  their  families  they  procure  houses  of  which 
the  rent  is  low,  or  else  get  their  landlords  to  reduce  the  rent  of 


APPENDIX.  357 

those  they  occupy,  and  the  same  with  stores.  The  clerks  find  a 
cheaper  place  to  board,  or  reduce  the  price  at  their  present 
places.  The  manufacturers  dismiss  some  of  their  hands,  and  cut 
down  the  wages  of  those  whom  they  continue  to  employ,  and 
all  mechanics  do  the  same.  Cotton  falls  in  price,  and  those  pro- 
ducing it  must  buy  fewer  goods  and  pay  less  for  the  production 
of  the  cotton.  All  articles  for  food  fall  in  price,  and  of  course 
the  farmers  raising  them  must  pay  less  for  the  labor  they  employ, 
and  buy  less  clothing  for  their  families,  and  all  those  who  work 
for  them  must  do  the  same;  hence  people  consume  more  of 
articles  produced  with  little  labor  and  less  of  those  which 
require  more.  Many  without  employment  are  unable  to  buy 
even  the  cheapest  food  and  clothing  at  these  low  rates,  and  all 
lands,  tenements,  everything  in  the  country  produced  by  labor, 
falls  in  price.  When  this  occurs,  it  is  said  that  it  makes  no  dif- 
ference if  you  receive  low  wages,  you  buy  all  those  things  at  a 
proportionably  low  rate,  so  one  thing  balances  another.  They 
do  not  even  consider  that  all  these  tilings  are  in  the  same  end 
of  the  scale,  and  bear  the  same  way ;  they  do  not  perceive  that 
little  devil — money — in  the  other  end  of  the  scale,  and  his  imps 
(the  usurers)  laughing  in  their  sleeves  at  the  folly  of  the  pro- 
ducers, and  saying,  "  With  six  cents  we  can  now  weigh  in  this 
balance  as  much  as  we  did  before  with  twelve,  eighteen,  or 
twenty-five.  However  divisible  this  labor  may  be,  whether 
large  or  small,  from  a  penny  to  the  sale  of  the  Exchange  in  New 
York  for  over  eight  hundred  thousand  dollars,  we  are  so  divisible 
that  we  can  at  all  times  fix  an  exact  balance,  and  by  a  sort  of 
magic  can  expand  ten  or  twenty  cents  to  a  dollar,  and  again 
contract  to  ten  or  fifteen  cents.  I  and  my  imps  never  want  a 
balance  for  all  or  any  of  the  bounties  of  Providence :  I  can  by 
my  imps  draw  myself  up  into  a  nut-shell,  and  I  and  my  posses- 
sors as  much  balance  all  these  things  when  so  drawn  up  as 
when  I  by  them  expand  over  the  world.  When  I  through  them 
expand,  the  people  think  less  of  me ;  when  I  by  them  contract 
myself,  I  draw  the  nation  with  me,  government  and  all;  they 
feel  my  power,  and  reverence  my  authority,  and  they  are  as 
much  compelled  to  bow  before  me  as  the  people  of  Babylon 
were  to  the  golden  image  set  up  by  Nebuchadnezzar." — Cur- 
rency, the  Evil  and  the  Remedy. 


358  APPENDIX. 


3.— Page  302 

Again,  in  regard  to  the  amount  of  currency  which  would  be 
required  for  the  business  of  the  nation,  I  think  it  would  be  less 
than  has  generally  been  in  circulation.  The  currency  being  at 
par  in  every  section  of  the  country,  no  delay  in  procuring  drafts 
for  remittance,  or  any  holding  on  for  higher  rates  of  interest, 
money  would  circulate  with  great  rapidity,  and  consequently 
for  the  same  amount  of  business  a  less  quantity  would  be  neces- 
sary ;  and,  as  to  wild  speculation,  there  would  be  less  danger 
from  that  than  there  ever  has  been  in  any  country.  The  great 
speculations  which  make  so  much  noise,  in  building-lots,  hoxises, 
lands,  etc.,  would  never  very  materially  interfere  with  the 
general  business  of  the  nation  ;  the  business  of  a  few  individuals 
might  be  broken  up  where  they  bought  on  credit  and  agreed 
to  pay  for  property  a  larger  sum  than  they  could  make  the 
property  pay  interest  on ;  but  this  would  never  interrupt  the 
general  prosperity  of  a  people.  "We  never  hear  of  hard  times 
in  any  country  except  when  the  interest  on  money  advances ; 
the  first  complaint  is  always  of  a  scarcity  of  money,  want  of 
what  is  necessary  to  do  business ;  not  only  a  scarcity  of  money 
to  pay  for  building-lots,  but  a  scarcity  for  all  business  purposes. 
From  great  abundance,  we  are  suddenly  in  great  want,  and  the 
rates  of  interest  have  increased  double,  treble  or  quadruple. 
One  now  borrows  money  at  six  per  cent,  interest  at  bank 
because  he  is  among  the  favored;  another  pays  in  the  same 
street  the  same  day  twelve  per  cent.,  another  twenty -four,  and 
another,  who  is  "  cornered,"  thirty-six ;  the  last  buys  the  use 
of  the  same  article,  in,  the  same  street,  on  the  same  day,  and 
pays  six  times  as  much  as  the  first ;  he  does  this  from  necessity. 
"Why  is  not  one  person  obliged  to  pay  on  the  same  day  in  the 
same  market,  for  a  barrel  of  flour  or  a  bushel  of  potatoes,  six 
times  as  much  as  another  individual  who  may  happen  to  be  in 
better  credit  or  greater  favor?  Is  there  not  as  great  a  risk  in 
selling  these  articles  as  in  lending  money?  Do  people  give 
better  security  when  they  buy  merchandise  than  when  they  bor- 
row money  ?  "What  would  be  said  of  a  grocer  who  matV  a* 
much  difference  in  the  price  of  a  pound  of  sugar  or  a  quart  of 
molasses,  charging  those  who  were  in  the  greatest  need  the 


APPENDIX.  359 

most  exorbitant  prices?  Those  who  can  buy  almost  nny 
quantity  of  goods  at  the  usual  market  prices  in  their  own  names 
without  giving  any  security,  pay  these  enormous  prices  for 
money.  Goods,  wares  and  merchandise,  which  are  the  products 
of  labor,  we  trust  out  on  a  single  name,  without  requiring  any 
security  for  the  payment  of  the  debt.  We  do  not  expect  the 
persons  buying  these  goods  to  be  impoverished  by  the  purchase ; 
if  we  anticipated  any  such  result,  we  should  certainly  demand 
security,  as  we  should  know  we  were  injuring  our  customers. 
But,  as  a  general  thing,  we  should  not  sell  to  them  at  all,  for  if 
it  were  usual  for  people  to  lose  by  the  purchase  of  goods,  wares 
or  merchandise,  or  any  property  whatever,  the  product  of  labor, 
none  of  these  things  would  be  sold  without  security,  and  all 
confidence  between  individuals  would  be  lost.  Society  could 
scarcely  exist  in  this  state ;  it  would  indeed  be  in  a  wretched 
condition.  "We  may  discourse  about  a  cash  system  without 
credit  as  much  as  we  please,  but  it  is  an  impossibility  ;  it  never 
did  and  never  can  exist. 

Why  is  it  necessary  that  in  lending  money  it  should  be  hedged 
about  with  so  many  securities,  and  these  securities  so  often 
suffer  by  it  ?  The  only  reason  which  can  be  assigned  for  it  is 
that  people  are  compelled  to  pay  more  for  the  use  of  money 
than  the  use  of  money  is  worth.  If  this  were  not  the  case,  to 
loan  money  would  not  be  hazardous.  All  the  debts  contracted 
by  the  purchase  of  goods,  wares  and  merchandise,  are  payable 
in  money  as  much  as  debts  contracted  by  borrowing  money. 
Why  should  not  a  debt  be  as  sacred  where  a  shoemaker  has 
bought  his  leather  and  given  his  note  or  paid  the  money  on  it, 
and  spent  his  labor  in  making  the  shoes,  as  a  debt  for  money 
loaned  ?  May  not  a  man  as  well  lose  his  money  as  his  labor  and 
leather,  when  he  depends  upon  these  for  his  bread,  as  much  as 
the  other  does  upon  his  money  for  his  subsistence  ?  I  believe 
more  than  nine-tenths,  and  probably  more  than  ninety -nine  hun- 
dredths,  of  these  debts  in  both  cases  are  lost  in  consequence  of 
unjust  laws  in  the  monetary  system.  The  interest  on  money  in 
all  countries  is  far  higher  than  the  producers  can  afford  to  pay, 
and  not  only  so  but  interest 'has  never  been  regulated  in  any 
nation.  Money  being  the  base  of  all  contracts,  the  change  in 
the  rates  of  interest,  and  the  monopoly  of  money  change  the 
base  of  every  contract  in  the  nation  after  the  contract  is  made, 


360  APPENDIX. 

and  then  the  producing  classes  are  blamed  for  over-production  and 
extravagance,  while  those  who  have  done  the  evil  are  esteemed 
for  their  wisdom  and  prudence. 

There  are  few  people  who  contract  debts  without  intending 
to  pay  them,  and  no  one  except  a  thief  at  heart  would  do  it 
unless  compelled  to  it  by  actual  want.  But  thousands,  by  ex- 
pecting to  obtain  work  and  being  disappointed  in  this,  become 
discouraged  and  broken  down  by  the  hardships  they  endure. 
These  men  are  to  be  pitied  instead  of  being  blamed,  as  they 
now  are  by  the  community — they  need  encouragement  instead 
of  condemnation  and  imprisonment;  no  man  should  seek  for 
employment  and  be  unable  to  get  it. 

Until  there  is  a  radical  change  in  the  monetary  system,  these 
evils  must  and  will  continue  as  certainly  as  cause  will  produce 
effect.  No  remedy  which  does  not  strike  at  the  root  of  the 
evil  can  remove  it,  and  the  power  to  do  this  is  in  the  hands  of 
the  nation. 

The  sudden  scarcity  of  money  docs  not  depend  on  the  showers 
of  the  heavens  or  on  an  abundant  crop,  but  upon  the  will  of  a  few 
moneyed  men,  Wall  street  brokers  and  petty  banks,  who  deter- 
mine when  it  shall  be  scarce  and  when  plenty,  and  when  the 
rate  of  interest  shall  be  high  or  low.  When  they  have,  by 
sudden  curtailment,  after  a  prosperous  season  of  business,  con- 
centrated in  their  hands  a  large  portion  of  the  earnings  of  the 
people,  it  is  for  their  interest  again  to  lend  money  at  low  rates 
of  interest,  that  the  people  may  earn  more  property  to  be  again 
taken  from  them  by  the  same  unjust  means. — Currency,  tlie  Evil 
and  the  Remedy. 

K.—Page  313. 

The  avarice  that  pervades  the  civilized  world  has  been  in- 
grafted upon  society  by  the  too  great  power  of  money.  In  most 
countries  it  has  made  production  by  labor  degrading  to  the  child 
whose  necessity  compels  him  to  perform  it.  The  skill  to  gain 
by  lending  money,  and  by  taking  advantage  of  others  in  bargain- 
ing, has  been,  and  is  taken  as  evidence  of  superior  talent,  until, 
by  example  and  precept,  avarice  has  been  instilled  into  the 
minds  of  children.  It  has  grown  with  their  growth  and 
strengthened  with  their  strength  until  it  has  corrupted  the  very 
foundations  of  society.  The  per  centage  incomes  on  bank,  rail- 


APPENDIX.  361 

road,  State,  and  other  stocks,  and  the  rates  at  which  money  can 
be  borrowed  and  lent,  are  the  great  leading  topics  of  a  business 
community.  The  topics  are  not,  IIow  shall  we  contrive  to  pro- 
duce by  our  labor  the  greatest  supply  of  all  the  necessaries  of 
life  for  the  general  good?  but,  on  the  contrary,  llo\v  shall  \ve 
contrive  to  get  the  largest  possible  per  centage  income  with  the 
least  possible  production  on  our  part  ?  This  state  of  society  is 
directly  at  variance  with  such  a  one  as  a  just  monetary  system 
would  naturally  induce.  It  is  as  much  opposed  to  the  natural 
rights  of  society  as  falsehood  is  to  truth  ;  and  no  continuance  of 
competition  in  production  or  distribution,  under  the  present 
monetary  laws,  will  be  any  more  likely  to  remedy  the  evils  of 
this  debasing  system,  than  competition  in  falsehood  would  be 
likely  to  produce  and  sustain  truth.  We  must  begin  improve- 
ment by  doing  away  the  great  gain  by  unrighteous  per  centage 
interest  on  money ;  and  then  the  wealth  wih1  naturally  be  widely 
distributed  among  those  who  do  the  most  for  the  good  of  man, 
instead  of  being  gathered  by  a  few,  who  thus  become  the  great 
oppressors  of  the  human  family. — MSS. 


I^—Page  314. 

As  the  present  monetary  laws  have  adjusted  society,  what 
prospect  is  there  before  a  young  man  starting  in  life  ?  Is  there 
any  reasonable  encouragement  for  him  to  produce  the  means  of 
subsistence  as  God  has  ordained — that  is,  by  his  daily  labor  ?  If 
he  sells  only  his  own  labor,  or  the  articles  which  his  own  daily 
labor  will  produce,  without  any  other  traffic,  trade,  or  specula- 
tion by  which  he  may  gain  undue  advantage  from  the  labor  of 
otbers,  he  is  doomed  to  the  severest  toil  for  his  whole  life,  espe- 
cially if  he  marries  and  maintains  a  family.  Should  he  be  dis- 
abled for  a  season  by  sickness  or  other  misfortune,  or  in  a  money 
crisis  happen  to  be  thrown  out  of  wdrk,  then  he  and  his  family 
are  compelled  to  be  solicitors  of  publit:  or  private  charity,  or  else 
they  must  suffer  for  the  want  of  food,  clothing,  and  shelter. 
Thousands  in  the  cities  of  New  York  and  Brooklyn  are  now  (on 
this  fifteenth  day  of  February,  1855)  in  this  sad  predicament. 
Yet  these  evils  and  sufferings  are  very  often  attributed  to  the 
mysterious  workings  of  the  laws  of  God,  while  they  are  evi- 
16 


362  APPENDIX. 

dently  owing  to  the  mysterious  magical  workings  of  the  monetary 
laws  of  man ;  and  are  as  much  in  opposition  to  the  righteous 
laws  of  God  as  the  acts  of  an  individual  who  commits  arson  or 
murder,  and  are  as  much  more  aggravated  in  their  character, 
and  effects  upon  the  welfare  of  the  public,  as  a  national  trans- 
gression is  greater  than  an  individual  one. 

Mr.  E.  W.  Emerson,  in  one  of  his  lectures,  speaks  of  judges 
or  governments  acting  in  their  official  capacity  as  the  brains  of 
the  nation.  If  the  brains  of  this  nation  cannot  make  laws  that 
will  govern  the  dollar,  then  the  dollar  is  greater  than  the  govern- 
ment brains  that  made  it;  for  if  two  great  powers  meet  in  com- 
petition with  each  other,  the  greater  will  rule  the  lesser  power ; 
and  in  this,  as  well  as  in  other  civilized  nations,  the  dollar  is 
the  greater  power,  and  rules  the  brains.  Governments  both 
theoretically  and  practically  admit,  that  they  have  not  brains 
enough  to  govern  the  use  of  the  dollar,  and  so  they  bow  down 
in  submission  to  the  gold  and  silver  idols  which  they  have  set 
up ;  and  by  and  through  the  use  of  these  idols  the  nation  is 
governed  in  opposition  to  every  just  law  of  God  and  man.  The 
dollar  not  only  governs  the  brains  of  the  nation,  hut  it  also 
comes  into  competition  with  the  physical  and  muscular  powers 
of  the  laboring  classes ;  and  though  their  brains  direct  how  they 
shall  perform  their  manual  labor  in  production,  yet  all  the 
machinery  brought  into  use,  and  all  the  labor  that  man  can  per- 
form, have  no  power  at  all  to  stand  in  competition  with  the 
centralizing  power  of  money. 

What  does  the  Government  of  the  State  of  New  York  say  in 
relation  to  this  important  matter?  It  says  that  borrowed 
money  is  worth  seven  per  cent,  interest  per  annum,  which 
means  just  this  :  that  the  producing  classes  are  bound  by  law 
first  to  support  themselves,  and  in  addition  to  this,  that  they 
shall  by  their  labor,  every  ten  years  and  three  months,  make  all 
the  improvements  that  have  heen  made  in  this  State  from  its 
first  settlement  down  to  the  present  day,  and  also  produce  all 
the  machinery,  goods,  wares  and  merchandise  which  are  now 
on  hand,  or  which  they  may  use  in  making  these  improvements, 
and  give  all  these  improvements  to  the  capitalists  who  now  own 
the  property,  for  the  ten  years  and  three  months'  rent  of  this 
property.  If  all  the  inhabitants  of  the  State  were  now  to 
engage  in  active  production,  it  is  doubtful  whether  they  could 


APPENDIX.  363 

support  themselves,  and  make  all  the  improvements  that  now 
exist  in  this  State  even  in  fifty  years :  for  the  inhabitants  of  this 
State  have  been  at  work  nearly  two  hundred  and  fifty  years  to 
produce  these  improvements;  yet  the  monetary  laws  of  this 
State  require  those  who  are  engaged  in  production  and  distribu- 
tion to  perform  all  this  in  ten  years  and  three  months.  The 
laws  require  of  the  laboring  classes  that  which  they  cannot 
possibly  perform,  and  then  cast  censure  upon  them  for  not  per- 
forming impossibilities.  These  remarks  upon  the  centralizing 
power  of  money  are  no  fictions,  bnt  are  truths  susceptible  of 
the  clearest  mathematical  demonstration,  and  under  such 
impositions  upon  the  producing  classes,  is  it  any  wonder  that 
people  should  seek  for  some  profession,  or  engage  in  traffic, 
trade,  and  speculation,  or  almost  any  other  calling,  rather  than 
that  of  productive  labor  ? — MSS. 

M.—Page  320. 

The  rights  of  property  in  a  nation  cannot  be  protected  except 
by  general  laws ;  for  it  would  be  impossible  for  the  Government 
to  see  that  every  individual  in  making  his  bargains  with  others 
got  the  exact  value  of  what  he  sold,  and  that  the  purchaser  got 
the  exact  worth  of  his  money.  The  Government  could  not  fix 
a  price  for  the  daily  labor  of  each  individual,  and  compel  others 
to  employ  him  at  this  price,  unless  it  should  also  compel  others 
to  buy  the  products  of  labor  at  remunerating  prices.  It  is  utterly 
impracticable  for  the  Government  to  have  a  supervision  over  the 
individual  agreements  in  the  nation,  and  superintend  the  busi- 
ness transactions  of  the  public.  All  that  it  can  or  ought  to  do 
in  this  important  matter,  is  to  make  such  general  laws  for  the 
government  of  the  property  as  will  naturally  tend  to  effect  its 
equitable  distribution.  Money  holds  a  legal  position  in  regard 
to  other  things  which  gives  to  it  a  controlling  power.  It  is  the 
legal  standard  by  which  all  values  are  determined,  and  the 
medium  by  and  through  which  the  exchange  of  all  valuable 
things  is  effected.  It  is  by  and  through  the  power  of  money 
that  the  individual  rights  of  property  in  every  nation  are  awarded 
and  protected.  The  laws  sustain  the  money  in  its  position  and 
protect  its  power  while  it  is  performing  its  functions  in  making 
the  distribution  of  wealth.  The  laws  protect  the  rights  of  pro- 


364:  APPENDIX. 

perty  by  enforcing  the  fulfilment  of  agreements,  so  that  each 
shall  receive  what  the  power  of  the  money  has  distributed  to 
him  as  his  share  of  the  wealth.  Hence  the  protection  of  the 
rights  of  property  must  depend  entirely  upon  the  just  power  of 
the  money;  if  the  power  of  the  money  be  unjust,  it  will  be 
certain  to  make  an  unjust  distribution  of  the  property,  and 
the  laws  will  protect  the  unjust  distribution,  for  they  must  sup- 
port the  power  of  the  money  and  enforce  the  fulfilment  of 
individual  agreements  made  in  conformity  with  its  legal  standard 
power,  otherwise  they  would  be  totally  inconsistent  in  them- 
selves. 

Governments  establish  and  sustain  money,  and  make  it  the 
basis  upon  which  individual  agreements  must  be  founded, 
and  then  leave  individuals  free  to  make  their  own  agreements 
one  with  another,  in  exchanging  their  land,  labor  and  commodi- 
ties. This  is  the  way  in  which  all  civilized  nations  protect  the 
legal  rights  of  property ;  and  there  is  no  other  practicable  way 
in  which  they  can  be  protected.  There  is  an  exception  to  this 
in  countries  where  the  laws  recognize  a  privileged  class,  and 
landed  property  held  by  this  class  is  protected  by  special  laws, 
and  is  not  liable  to  be  sold  to  pay  their  debts.  By  thus  exempt- 
ing their  property  from  execution,  it  is  not  under  the  controlling 
power  of  money,  but  all  the  other  property  in  the  country  is 
governed  by  this  power. 

Money  holds  a  legal  position  as  totally  different  from  that 
held  by  labor  and  property  as  the  position  held  by  the  helm  of 
a  ship  is  different  from  that  held  by  the  ship  and  its  cargo.  It 
is  its  position  that  gives  to  the  helm  the  power  to  govern  and 
direct  the  destiny  of  the  ship;  and  it  is  the  legal  position  of 
money  that  gives  to  it  the  power  to  govern  the  value  of  all  pro- 
perty, and  control  the  distribution  of  wealth.  If  the  helm  were 
removed  from  the  ship's  stern  and  placed  in  the  hold,  it  would 
be  as  powerless  to  control  the  direction  of  the  ship  as  any  other 
part  of  the  cargo ;  and  the  ship  and  cargo,  helm  and  all,  would 
be  at  the  mercy  of  the  winds  and  waves.  If  all  the  gold  and 
silver  coins  in  the  Sub-Treasury  and  banks  were  made  into  plate 
for  private  use,  they  would  be  as  powerless  to  govern  the  value 
of  property  and  the  distribution  of  wealth  as  the  helm  of  the 
ship  when  stowed  in  the  hold  to  direct  the  course  of  the  vessel. 
They  would  both  have  lost  their  position  to  govern.  The 


APPENDIX.  365 

money  might  be  recoined,  and  it  would  be  restored  to  its  former 
position  and  power ;  and  the  helm  might  he  again  attached  to 
the  stern  of  the  ship,  and  thus  be  restored  to  its  former  posi- 
tion and  power.  The  helm  of  a  ship  made  of  wood,  iron,  and 
copper  is  better  and  more  convenient  for  use  than  it  would  he 
if  it  were  made  of  solid  gold ;  and  money  when  made  of  paper 
is  far  more  convenient  for  use  than  when  it  is  made  of  gold  and 
silver.  If  the  National  Government  will  institute  good  paper 
money,  and  by  making  it  the  legal  tender,  place  it  in  its  true 
position,  it  will  save  an  immense  amount  of  labor,  besides  being 
a  far  safer  currency  for  public  use.  "When  the  Government  shall 
institute  paper  money  secured  by  landed  estate,  and  then  found 
its  value  upon  a  just  rate  per  cent,  interest  instead  of  upon  its 
material,  and  shall  make  it  a  tender  in  payment  of  debts,  it  will 
rightly  govern  the  value  and  distribution  of  property,  for  it  will 
be  sure  to  distribute  the  wealth  according  to  the  earnings 
of  labor ;  whereas  it  is  now  sure  to  help  a  few  to  mono- 
polize the  wealth  that  the  many  produce  by  their  labor.  If 
the  money  be  thus  instituted,  and  a  rate  per  cent,  interest 
be  established  sufficient  only  to  pay  the  expense  of  furnishing 
it,  the  money  will  form  a  just  foundation  upon  which  to  build 
contracts. 

We  are  aware  that  the  financiers  of  this  and  other  nations 
will  tell  the  public,  and  endeavor  to  persuade  the  governments 
that  this  is  impossible — that  since  it  never  has  been  done,  it 
never  can  be  done.  They  will  be  just  as  positive  in  relation  to 
this  all-important  matter  as  kings  and  despots  are  that  they  have 
a  divine  right  to  reign,  and  that  a  democratic  or  republican 
government  is  a  trespass  against  Divine  authority,  and  never 
will  be  permitted  to  stand  except  for  a  brief  period  of  time.  To 
fix  and  maintain  a  right  rate  per  cent,  interest  for  the  use  of 
money  is  striking  at  the  very  root  of  despotic  power ;  and  the 
producing  public  must  expect  to  have  it  called  impracticable, 
and  to  have  a  strong  opposition  to  its  adoption.  Yet  we  do 
know  that  it  is  as  practicable  for  the  Government  to  supply  the 
necessary  quantity  of  money  that  shall  be  permanently  safe,  and 
regulate  the  rate  per  cent,  interest  as  to  fix  and  regulate  the 
length  of  the  yard.  The  Government  can  do  this  so  effectually 
that  any  person  can  as  readily  tell  what  the  rate  of  interest  will 
be  in  every  part  of  this  nation  for  five  or  ten  years  to  come  as 


366  APPENDIX. 

to  tell  what  will  be  the  length  of  the  yard.  Money  is  as  much 
a  standard  of  value  as  the  yard  is  of  length,  and  it  should  and 
can  be  so  instituted  and  governed  that  any  one  may  as  readily 
tell  the  value  of  money  as  the  length  of  the  yard. — MSS. 


sfeall  not  fail  wr  &*  fcistorogefr,  till  \t  fcato  sti 
in      tmt" 


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